If you use the last 3 months and extrapolate forward - we're back down to ~2.5%.
If you use only the last month and extrapolate forward - we're at ~1.25%.
Housing costs are ~39% of the economy alone. If those aren't inflating - it's pretty hard for overall inflation to be super hot.
Unless rents & owner's equivalent rents start shooting up again, inflation isn't going back to 10%.
Core-CPI isn't so rosy: the last three MoM values are 0.4, 0.5, and 0.4 (1.3% core CPI inflation over 3 months), which extrapolates to 5.3% yearly core-inflation.
Which _is_ down btw compared to last year... But its not nearly down enough.
The Fed is making judgements primarily off of core, not headline. e.g. Oil dropped to ~$65 last month, but is now at ~$85. Does it make sense to consider last month's number a durable trend down given that the low headline was primarily due to decline in energy prices? A decline that doesn't exist anymore? No, not really.
CPI in general is a poor measure for driving Fed policy since many measures are lagged, but even still, far more sensible to use core and strip outliers
They can be used pretty much interchangeably as an inflation measure, methodology not different enough to create material differences.
Nobody is implying rents when they say "housing prices"
Which is correct. What was said up thread is irrelevant. If you want to correct him for stating that as off topic or misconstruing the parent comment, that's fine. But spreading misinformation about home prices being included in CPI is not.
Again, nobody is implying "rents" when they say "housing prices".
Am I in some twilight zone episode here?
If an asset's income increases, the value of the asset increases.
Purchasing is less liquid than renting, so it tends to lag. And some characteristics are more amenable to renting vs other use.
But overall their trends are equivalent .
Asset values are not just a function of cash flow but also discount rates, growth in cash flow, and valuation multiples. Real estate cap rates have been compressing for decades, for example (same cash flow equals higher value, all else equal)
Please don’t spread misinformation in these threads
Discount rates have largely to do with inflation, and comes out in the wash of asset valuation changes.
> Asset values are not just a function of cash flow but also growth in cash flow
:/
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Price to rent ratio:
https://tradingeconomics.com/united-states/price-to-rent-rat...
Though really, that's just a graph of inflation.
Edit: misread GP as Housing COST. Not Housing PRICE
Housing Price is NOT included in CPI.
Housing Cost IS (via the OER)
It includes a survey based owners equivalent rents (OER), and a separate measure for tenant rents. Home prices used to be a factor in CPI calculations, but haven't been for decades now. It can be argued that rent is more relevant than valuations, since values fluctuate with rates... but ignoring valuations arguably allows asset bubbles to form more readily, which has its own downstream consequences.
In general, the CPI is not well suited to its purpose as the data is highly lagged. There are public rent measures that are much more real time, and would allow Fed to act more readily on current data.
https://www.bls.gov/cpi/factsheets/owners-equivalent-rent-an...
Edit: I misread GP's comment as Housing Cost, not House Price. Though in my defense, I have seen some people imply Housing Cost isn't included.
The Fed plan isn't to just tame inflation but reduce employment to slow wage increases, reverse asset gains with "higher for longer", and restore credibility.
Get comfortable. Still a long way to go before that pivot.
Everyone is expecting a quick pivot which is why I think that is exactly what will not happen.
Many people are making foolish purchases now at inflated asset prices and high interest rates because they expect that they will be able to refinance at lower rates in a year or so. What if they can't?
Once the general public starts to realize what "higher for longer" actually means we will (hopefully) have a huge sentiment shift to the downside with corresponding asset price corrections.
No, the Fed’s plan is to tame inflation. If Powell can do that while maintaining strong employment, he’ll go down in history as a legend. Nobody wants unemployment to go up or asset prices to go down.
Sure, but if it doesn’t cause inflation it isn’t the Fed’s problem. In theory, it’s tough to square a tight labor market with moderate price levels. But we’re seeing a strange resilience in hiring as tech’s bubble projects and their employees absorb the bulk of the pain.
Sorry, but why do you think landlords have experienced an increase in mortgage costs?
Maybe if they have adjustable rate mortgages or if their loan originated after March 2022. But I don't think that's the case for the vast majority of established landlords.
What's way more likely is that everyone marking rent money off of leveraged property went ahead and refinanced everything to 2-3% fixed rate mortgages as soon as that became an option.