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In my neck of the woods, by far the largest and most impactful inflation has been in the housing sector - 50% price inflation over the past two years. This is e

In my neck of the woods, by far the largest and most impactful inflation has been in the housing sector - 50% price inflation over the past two years. This is entirely attributable to the Fed's pumping of soft assets like stocks, leading to a bunch of paper millionaires cashing out.

colinmhayes 4y ago
Also due to the fact that we stopped building new homes after 08. If supply keeps up with rising demand prices don't change.
- gruez 4y ago
  >Also due to the fact that we stopped building new homes after 08. That's easily refuted with a quick search. https://tradingeconomics.com/united-states/housing-starts https://tradingeconomics.com/united-states/housing-starts
  - aeternum 4y ago
    If you zoom out on that graph, housing starts were well-below average for over a decade and were actually trending down even before 08: https://fred.stlouisfed.org/series/HOUST https://fred.stlouisfed.org/series/HOUST Decreased supply along with increasing population(demand) generally yields a shortage and increased prices.
  - presentation 4y ago
    It’s probably also that it really depends on the place. If you’re in SF really does feel like the housing market has stood still.
- giantrobot 4y ago
  I'm currently sitting in a house that completed construction in December. I suspect your information might not be right.
  - colinmhayes 4y ago
    https://www.statista.com/statistics/1041889/construction-year-homes-usa/ https://www.statista.com/statistics/1041889/construction-yea...
    - monkeynotes 4y ago
      Even your source shows that ~17M homes have been built since 2008. I mean, it's a drop off from previous decades, but it's hyperbole to say no homes have been built.
  - marcusverus 4y ago
    "stopped building new homes" is clearly an exaggeration, but the spirit of the comment is spot on. Housing starts did collapse around '08, and only returned to the historical average in ~2021. Even so, we're still producing fewer units than we were producing in the 70's--when the population was ~60% of what it is now! How can there be any doubt that this production glut has played a huge role in the rise of housing prices? https://fred.stlouisfed.org/series/HOUST https://fred.stlouisfed.org/series/HOUST
    - JumpCrisscross 4y ago
      > we're still producing fewer units than we were producing in the 70's--when the population was ~60% of what it is now The population was growing around 1.1% a year in the 70s; it was 0.75% the last decade and is currently between 0.1% and 0.25% [1]. [1] https://united-states.reaproject.org/analysis/comparative-indicators/growth_by_decade/population/tools/ https://united-states.reaproject.org/analysis/comparative-in...
      - bobthepanda 4y ago
        To compare to housing starts, you need to compare to absolute numbers. You also need to consider the fact that household sizes are trending downwards pretty consistently, so there needs to be more houses for the same number of people.
- jermaustin1 4y ago
  This is a complete anecdote, but I am surrounded by new neighborhoods all built in the last couple of years, and some new ones being built now. We also have a BUNCH of new 4 story apartments that have never been seen in suburban Houston before 2020. I know Houston supposedly got a HUGE influx of people leaving NYC and SV in 2020-2021, but still, my home town of around 20k people just got 2 brand new neighborhoods in 2021 with 500 homes between them all selling for $300k+ when you used to be able to buy a house in town for $50-100k. Even with record breaking housing development, the cost of homes in the last few years in Houston has been ridiculous.
  - conductr 4y ago
    That's primarily linked to commodity/labor prices over the past couple years. And, to some degree because developers know that people buying in Texas have to buy. It's not like they're looking to upgrade from a current residence, they've already moved and have no place to live.
- adam_arthur 4y ago
  Housing units per capita is at an all time high. Housing units per working age person is at an all time high, by far. Housing units per household is at year 2000 levels and in line with history. Check the data, it's all on FRED What you're repeating is common conversational talking points spread as fact. It is true that building slowed in the 2010s, but housing was overbuilt in the 2000s too which neutralizes that. Also number of housing units under construction is at an all time high right now, while population growth is the slowest ever (including immigration) and decelerating. Look to the Japanese property sector for the future of US pricing. Demographic story is a long one that will take decades to play out though. Immigration policy could change things
  - colinmhayes 4y ago
    Japanese property values are reasonable because their zoning is decided at the national level and local residents have next to 0 power to stop people from building things in properly zoned areas.
    - adam_arthur 4y ago
      That's a big reason too, but also because their population is declining. https://www.google.com/search?q=japanese+population+growth+rate https://www.google.com/search?q=japanese+population+growth+r... What do you think happens to housing units per capita as population levels decline? The US and China are on the same path, just some years behind. We can ignore demographics for the next handful of years, but it will become very impactful on a 10+ year time horizon. China will deal with the inverted population pyramid sooner than us, so it will be interesting to see if that affects their GDP surpassing the US. Anyway, the property sector will be super interesting in 50 years, when everything is overbuilt relative to population size. I imagine eventually rents will naturally become deflationary
    - jbay808 4y ago
      Japan also had a colossal real estate bubble pop in the early 90s, which created lasting lessons for Japanese real estate speculators.
solenoidalslide 4y ago
It's unfortunate the propaganda du jour is "Inflation is caused by $15 minimum wage and other table scraps for the poor."
tryptophan 4y ago
> is entirely attributable to the Fed's pumping of soft assets like stocks The fed only stopped buying MBS a month ago. (Also, they hold like $2T+ of them on their balance sheet. Im sure the 'experts' over at the fed will say this has no effect on the current market)
- slaw 4y ago
  I can't find any source that says Fed stopped buying MBS.
  - thoughtstheseus 4y ago
    The Fed publishes its balance sheet holdings publicly.
chii 4y ago
> a bunch of paper millionaires cashing out [to buy property] so what did the seller of those property spend their profits on?
- klyrs 4y ago
  More expensive real estate
  - monkeynotes 4y ago
    Yeah, cash out and leverage to bigger investments. Rinse and repeat.
  - mywittyname 4y ago
    You don't need to sell off stocks to invest in more real estate. Even small-time investors can get margin loans (or use them as collateral) to finance mortgages while avoiding the tax implications of liquidating investments.
    - klyrs 4y ago
      Yeah, that loophole really needs to get closed. Meanwhile, Canada is focused on foreign buyers who are too lazy to set up dummy corps... https://www.thebeaverton.com/2022/04/canada-to-ban-foreign-homebuyers-who-refuse-to-set-up-dummy-corporations/ https://www.thebeaverton.com/2022/04/canada-to-ban-foreign-h... (article is satire but perversely accurate)
- skeeter2020 4y ago
  Unless they moved into a van down by the river, a bigger even more expensive home. Ya gotta live somewhere!
  - ethbr0 4y ago
    And that somewhere is Florida.
  - deleted 4y ago
nradov 4y ago
Real estate prices aren't included in inflation (BLS CPI) calculations because those are investment assets, like buying stocks or gold bullion. The CPI does account for housing costs through rent and owner's imputed rent.
- jbay808 4y ago
  > The CPI does account for housing costs through rent and owner's imputed rent. This can be very roughly approximated by a 10-year moving average on the product of (housing prices x mortgage rates). CPI shelter inflation is currently ticking up each month like clockwork, at 5% and climbing, and it has a long way still to go to catch up with that trend.
- JaimeThompson 4y ago
  Except when it comes time to tax them then homes are taxed each year, in most of the US, on what they are currently valued at on the tax rolls.
  - nradov 4y ago
    Property taxes are indirectly included in the CPI through owner's imputed rent. https://www.bls.gov/cpi/questions-and-answers.htm https://www.bls.gov/cpi/questions-and-answers.htm
CuriouslyC 4y ago
Housing inflation is also exacerbated by low interest rates. I think severe taxes for unoccupied homes is a better solution than bumping rates though, as houses are already completely unaffordable for most and a rate hike just makes that worse for many while not limiting firms that buy in cash.
- gruez 4y ago
  >I think severe taxes for unoccupied homes is a better solution than bumping rates though Yeah but unoccupied units is only a few % in the hottest housing markets. This makes sense, considering that the opportunity cost of leaving a home empty is higher if the rent is higher. Because of this I'm inclined to believe it's popular-but-ineffective intervention, like banning foreign buyers (which also make up a few % of overall sales)
  - CuriouslyC 4y ago
    I'm sure there are a few different segments that could be targeted depending on the area. Housing inflation really does need to be solved without impacting the ability of a median income person to afford a house though. Housing affordability is one of the biggest economic problems of the modern age.
  - thedailymail 4y ago
    As with many complex problems, the solution will likely need to include multiple parts. Taxing unoccupied properties and putting limits on who or what can buy residential properties (and how many they can buy) could both be elements of a bigger affordable housing package.
    - mywittyname 4y ago
      A less complicated solution would be to build more housing. Governments weld a lot of power in this respect. They can use eminent domain to acquire land and they have the capability to finance projects on an unrivaled scale. If we want low-cost housing, the government can provide that. Instead, we rely on a market that is designed to optimized for highest cost the market can bare.

colinmhayes 4y ago

Also due to the fact that we stopped building new homes after 08. If supply keeps up with rising demand prices don't change.

gruez 4y ago
>Also due to the fact that we stopped building new homes after 08. That's easily refuted with a quick search. https://tradingeconomics.com/united-states/housing-starts https://tradingeconomics.com/united-states/housing-starts
- aeternum 4y ago
  If you zoom out on that graph, housing starts were well-below average for over a decade and were actually trending down even before 08: https://fred.stlouisfed.org/series/HOUST https://fred.stlouisfed.org/series/HOUST Decreased supply along with increasing population(demand) generally yields a shortage and increased prices.
- presentation 4y ago
  It’s probably also that it really depends on the place. If you’re in SF really does feel like the housing market has stood still.
giantrobot 4y ago
I'm currently sitting in a house that completed construction in December. I suspect your information might not be right.
- colinmhayes 4y ago
  https://www.statista.com/statistics/1041889/construction-year-homes-usa/ https://www.statista.com/statistics/1041889/construction-yea...
  - monkeynotes 4y ago
    Even your source shows that ~17M homes have been built since 2008. I mean, it's a drop off from previous decades, but it's hyperbole to say no homes have been built.
- marcusverus 4y ago
  "stopped building new homes" is clearly an exaggeration, but the spirit of the comment is spot on. Housing starts did collapse around '08, and only returned to the historical average in ~2021. Even so, we're still producing fewer units than we were producing in the 70's--when the population was ~60% of what it is now! How can there be any doubt that this production glut has played a huge role in the rise of housing prices? https://fred.stlouisfed.org/series/HOUST https://fred.stlouisfed.org/series/HOUST
  - JumpCrisscross 4y ago
    > we're still producing fewer units than we were producing in the 70's--when the population was ~60% of what it is now The population was growing around 1.1% a year in the 70s; it was 0.75% the last decade and is currently between 0.1% and 0.25% [1]. [1] https://united-states.reaproject.org/analysis/comparative-indicators/growth_by_decade/population/tools/ https://united-states.reaproject.org/analysis/comparative-in...
    - bobthepanda 4y ago
      To compare to housing starts, you need to compare to absolute numbers. You also need to consider the fact that household sizes are trending downwards pretty consistently, so there needs to be more houses for the same number of people.
jermaustin1 4y ago
This is a complete anecdote, but I am surrounded by new neighborhoods all built in the last couple of years, and some new ones being built now. We also have a BUNCH of new 4 story apartments that have never been seen in suburban Houston before 2020. I know Houston supposedly got a HUGE influx of people leaving NYC and SV in 2020-2021, but still, my home town of around 20k people just got 2 brand new neighborhoods in 2021 with 500 homes between them all selling for $300k+ when you used to be able to buy a house in town for $50-100k. Even with record breaking housing development, the cost of homes in the last few years in Houston has been ridiculous.
- conductr 4y ago
  That's primarily linked to commodity/labor prices over the past couple years. And, to some degree because developers know that people buying in Texas have to buy. It's not like they're looking to upgrade from a current residence, they've already moved and have no place to live.
adam_arthur 4y ago
Housing units per capita is at an all time high. Housing units per working age person is at an all time high, by far. Housing units per household is at year 2000 levels and in line with history. Check the data, it's all on FRED What you're repeating is common conversational talking points spread as fact. It is true that building slowed in the 2010s, but housing was overbuilt in the 2000s too which neutralizes that. Also number of housing units under construction is at an all time high right now, while population growth is the slowest ever (including immigration) and decelerating. Look to the Japanese property sector for the future of US pricing. Demographic story is a long one that will take decades to play out though. Immigration policy could change things
- colinmhayes 4y ago
  Japanese property values are reasonable because their zoning is decided at the national level and local residents have next to 0 power to stop people from building things in properly zoned areas.
  - adam_arthur 4y ago
    That's a big reason too, but also because their population is declining. https://www.google.com/search?q=japanese+population+growth+rate https://www.google.com/search?q=japanese+population+growth+r... What do you think happens to housing units per capita as population levels decline? The US and China are on the same path, just some years behind. We can ignore demographics for the next handful of years, but it will become very impactful on a 10+ year time horizon. China will deal with the inverted population pyramid sooner than us, so it will be interesting to see if that affects their GDP surpassing the US. Anyway, the property sector will be super interesting in 50 years, when everything is overbuilt relative to population size. I imagine eventually rents will naturally become deflationary
  - jbay808 4y ago
    Japan also had a colossal real estate bubble pop in the early 90s, which created lasting lessons for Japanese real estate speculators.

solenoidalslide 4y ago

It's unfortunate the propaganda du jour is "Inflation is caused by $15 minimum wage and other table scraps for the poor."

tryptophan 4y ago

> is entirely attributable to the Fed's pumping of soft assets like stocks The fed only stopped buying MBS a month ago. (Also, they hold like $2T+ of them on their balance sheet. Im sure the 'experts' over at the fed will say this has no effect on the current market)

slaw 4y ago
I can't find any source that says Fed stopped buying MBS.
- thoughtstheseus 4y ago
  The Fed publishes its balance sheet holdings publicly.

chii 4y ago

> a bunch of paper millionaires cashing out [to buy property] so what did the seller of those property spend their profits on?

klyrs 4y ago
More expensive real estate
- monkeynotes 4y ago
  Yeah, cash out and leverage to bigger investments. Rinse and repeat.
- mywittyname 4y ago
  You don't need to sell off stocks to invest in more real estate. Even small-time investors can get margin loans (or use them as collateral) to finance mortgages while avoiding the tax implications of liquidating investments.
  - klyrs 4y ago
    Yeah, that loophole really needs to get closed. Meanwhile, Canada is focused on foreign buyers who are too lazy to set up dummy corps... https://www.thebeaverton.com/2022/04/canada-to-ban-foreign-homebuyers-who-refuse-to-set-up-dummy-corporations/ https://www.thebeaverton.com/2022/04/canada-to-ban-foreign-h... (article is satire but perversely accurate)
skeeter2020 4y ago
Unless they moved into a van down by the river, a bigger even more expensive home. Ya gotta live somewhere!
- ethbr0 4y ago
  And that somewhere is Florida.
- deleted 4y ago

nradov 4y ago

Real estate prices aren't included in inflation (BLS CPI) calculations because those are investment assets, like buying stocks or gold bullion. The CPI does account for housing costs through rent and owner's imputed rent.

jbay808 4y ago
> The CPI does account for housing costs through rent and owner's imputed rent. This can be very roughly approximated by a 10-year moving average on the product of (housing prices x mortgage rates). CPI shelter inflation is currently ticking up each month like clockwork, at 5% and climbing, and it has a long way still to go to catch up with that trend.
JaimeThompson 4y ago
Except when it comes time to tax them then homes are taxed each year, in most of the US, on what they are currently valued at on the tax rolls.
- nradov 4y ago
  Property taxes are indirectly included in the CPI through owner's imputed rent. https://www.bls.gov/cpi/questions-and-answers.htm https://www.bls.gov/cpi/questions-and-answers.htm

CuriouslyC 4y ago

Housing inflation is also exacerbated by low interest rates. I think severe taxes for unoccupied homes is a better solution than bumping rates though, as houses are already completely unaffordable for most and a rate hike just makes that worse for many while not limiting firms that buy in cash.

gruez 4y ago
>I think severe taxes for unoccupied homes is a better solution than bumping rates though Yeah but unoccupied units is only a few % in the hottest housing markets. This makes sense, considering that the opportunity cost of leaving a home empty is higher if the rent is higher. Because of this I'm inclined to believe it's popular-but-ineffective intervention, like banning foreign buyers (which also make up a few % of overall sales)
- CuriouslyC 4y ago
  I'm sure there are a few different segments that could be targeted depending on the area. Housing inflation really does need to be solved without impacting the ability of a median income person to afford a house though. Housing affordability is one of the biggest economic problems of the modern age.
- thedailymail 4y ago
  As with many complex problems, the solution will likely need to include multiple parts. Taxing unoccupied properties and putting limits on who or what can buy residential properties (and how many they can buy) could both be elements of a bigger affordable housing package.
  - mywittyname 4y ago
    A less complicated solution would be to build more housing. Governments weld a lot of power in this respect. They can use eminent domain to acquire land and they have the capability to finance projects on an unrivaled scale. If we want low-cost housing, the government can provide that. Instead, we rely on a market that is designed to optimized for highest cost the market can bare.