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The purchasing power of the dollar is waning, but the CPI ignores house price inflation.
By Wolf Richter for WOLF STREET.
House prices are up 11.2% from a year ago, the biggest increase since the top of the housing bubble 1 in 2006, according to the current National Case-Shiller House Price Index for January .
The index is a good measure of “house price inflation” because it is based on the “pairs of sales” method, comparing the selling price of a house in the current month to the price. of same house when it has been sold previously, which tracks the dollar amount needed to buy the same home over time.
But house price inflation is not included in the Bureau of Labor Statistics consumer price index. While about a third of the CPI is based on shelter costs, it exclusively tracks rents rather than house prices. Even the CPI for “homeowner’s equivalent rent,” which is about 25% of the CPI, is based on homeowners’ estimates of how much their home is worth. rental for. This “homeowner’s equivalent rent” CPI rose only 2.0% year-over-year (green line), compared to the Case-Shiller index, which climbed 11 , 2% (red line).
The Case-Shiller index was set at 100 for January 2000. Thus, the national index value of 236 indicates that house prices have jumped 136% since January 2000, including the drop in the middle, of which l The CPI for homeowners increased only 72% over the same period. But for many cities, prices have gone up a lot more, as we’ll see in a moment.
So you know what’s going on here: The costs of homeownership are skyrocketing, but only part of it is included in our inflation measures, making the CPI an estimate of the loss of purchasing power. dollar into a sad joke.
Los Angeles – # 1 most beautiful real estate bubble
Prices for single-family homes in the Los Angeles subway were up 1.0% in January from December and 10.8% year-over-year, according to the Case-Shiller Index. The Los Angeles Index value of 321 indicates that subway house prices have jumped 221% since January 2000, more than tripling in 20 years, making Los Angeles the best real estate bubble on this list. Earlier today, I discussed the different trajectories of condo prices and house prices by price steps.
All of the graphics below are at the same scale as Los Angeles. As we go through the list, the amount of white space above the price zone increases, showing that since 2000 other subways have experienced less house price inflation than Los Angeles, although that there were many.
San Diego:
The Case-Shiller Index for the San Diego subway rose 1.4% in January from December and a whopping 14.2% from the previous year. Prices have more than tripled (+ 202%) since 2000:
Seattle:
Seattle subway house prices jumped 1.4% in January from December and 14.3% year-over-year, making it the second-largest annual home price inflation. fastest among Splendid Housing Bubbles here, behind Phoenix (15.8%, below):
San Francisco Bay Area:
This is where condo prices returned to 2018 levels, but single-family home prices rose 0.2% in January from December and 9.5% from a year ago, after nearly tripling since 2000. The Case-Shiller Index for “San Francisco” covers San Francisco Bay Area, San Mateo (northern part of Silicon Valley), Alameda and Contra Costa (East Bay) counties and Marin (North Bay):
Miami:
In the Miami metro, house prices rose 1.2% for the month and 10.4% year-over-year. Although they have increased 173% since 2000, they remain just a bit below the insane peak of the real estate bubble 1:
Portland:
In the Portland subway, house prices rose 1.1% for the month and 10.6% year-over-year:
Washington DC:
Washington DC subway house prices rose 0.8% for the month and 10.7% year-over-year, after passing the top of the housing bubble 1 at the end of the l ‘last year:
Boston:
In the Boston subway, house prices rose 0.8% for the month and 12.7% year-over-year:
Tampa:
Home prices in the Tampa subway were up 1.1% for the month and 11.9% year-over-year:
Denver:
Denver metro house prices rose 1.0% for the month and 10.0% year over year:
Phoenix:
Home prices in the Phoenix subway jumped 1.5% for the month and 15.8% year-over-year, making Phoenix the market with the highest annual house price inflation. hot among the Splendid Housing Bubbles here, ahead of Seattle (14.3%) and San Diego (14.2%):
New York Subway:
House prices rose 0.9% for the month and 11.3% year over year. As I mentioned earlier today, depending on the price points, there were big differences with the prices of lower level homes increasing 14.9%, but the prices of condos remaining in the same narrow range. during three years. New York’s Case-Shiller Index covers New York and many counties in the states of New York, New Jersey and Connecticut. What a wonderful spike over the past six months:
Las Vegas:
Home prices in the Las Vegas metro are up 0.9% for the month and 8.5% year-over-year:
Dallas:
Housing prices in the Dallas subway – Collin, Dallas, Delta, Denton, Ellis, Hunt, Johnson, Kaufman, Parker, Rockwall, Tarrant and Wise counties – rose 0.8% for the month and 9%. 2% year over year, and have increased 110% since 2000, meaning house price inflation has totaled 110% over the past 20 years. In the remaining handful of cities in the Case Shiller Index of 20 cities, 20-year house price inflation has been less than 100%, making Dallas the latest entry on this list of top housing bubbles. splendid:
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