A housing bubble the Fed doesn’t see

Inflation measures ignore housing price [Click to view in browser](. Good afternoon, Inflation data ignores our housing crisis. It fails to accurately see the major problem facing our economy. Let us explain why. Today’s inflation numbers came in as follows: - 0.6% month over month change and 2.6% year over year - 0.3% month over month change excluding food and energy and 1.6% year over year There is one line item I want to point out to you… The highlighted item is the government’s attempt to account for housing. But it does a horrible job. You see, CPI only considers the goods you consume. Buying a house is considered a capital investment. Instead, they try to come up with a rental equivalent. And it’s an abysmal failure. In the United States, homeownership is around 65.8%. CPI says ‘housing’ is up 1.7% year over year. Except actual housing prices are up 16.2% year over year. These numbers aren’t even close. And considering that we’re at the lowest levels of supply in years, around 1.9 months of inventory, the bidding wars aren’t likely to stop soon. A tale of two houses Housing price increases aren’t uniform. It mirrors the story of the pandemic recovery. Fewer and fewer low-end housing units sell each year. You can see in the chart below from the U.S. Census Bureau how we’re slipping to a point most housing costs over $200,000. While lower-income households started to catch up in 2019 they got slammed in 2020, creating a larger affordability gap. This likely puts more demand on low-end multi-family housing in the near future. But if you expect the Fed to help out, think again. They’re more interested in the topline numbers. In fact, there are a host of markets in upheaval from central bank actions. 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