Overall inflation is going down, but housing costs are stubbornly high. This is a problem for the Fed because housing is a big expense for most people and affects the overall inflation rate.
Mark Franceski managing director of the housing research company Zelman & Associates, stated that "if you want to know where inflation is going, you need to know where housing inflation is going."
Experts expected housing inflation to slow down based on data from other sources, but that hasn't happened yet. This is surprising because it makes housing less affordable for buyers and even though existing homeowners are somewhat protected by fixed-rate mortgages.
The reason the data is different is because inflation data uses rent prices, not home prices or mortgage rates. While private data shows rent going down, it hasn't shown up in the government's data yet, creating a confusing situation for the Fed. The pandemic may also have muddled the measurement of home prices in inflation data.
https://www.nytimes.com/2024/02/26/business/economy/housing-inflation-fed.html
7 comments:
This is an interesting and a little confusing. Interesting to me that even though we know the data for home prices and mortgage rates, we have to look at rent prices because of the information lapse with the government. That seems like a recipe for disaster that I didn't know existed.
The housing prices are definitely a big concern as someone will enter the housing market in a couple of years. Housing is more expensive than ever and really not affordable for the majority of people. What will be the effect on the economy if these prices stay stubborn?
The big issue is lack of supply of homes despite the level of demand from consumers to purchase homes. There needs to be a strong initiative to build houses in America quickly and safely.
I agree with Brady, the lack of supply is definitely one of the things that have been impacting the most on high housing costs. And since construction services are not immediate, it would be good to see some more incentives for building more houses, so we can maybe see a decline in prices in the future.
Will be interesting to see how home prices react in the next generation as more people will seemingly be unable to afford homes. Hopfully the speculation that drives home prices cools down so homes become more affordable.
I wonder what is making housing prices so resilient even through all the interest rate hikes. It will be interesting to see how the housing sector performs in the upcoming years after home prices increased so dramatically in such a short time.
This is concerning especially for first time home buyers. I wonder how it will play out in the future, and if they will be able to keep up with supply and demand.
Post a Comment