House Party

But the potential acceleration of CPI housing costs surely won't please audiences.
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Eddie Punchclock

JACKSON HOLE, Wyo. --

Quae est domestica sede iucundior

?

Thus

Cicero

a few years back.

Right right right.

Homeownership has

increased markedly over the past few years (and it now stands at its highest level ever). So have house prices.

Your narrator reckons that this figures into the spending equation (something we detailed

yesterday) in no small way. And the upside impact coming from this key wealth driver seems unlikely to fade meaningfully anytime soon.

The

numbers show that

affordability fell last year ... but it's still way high. The 1999 figure goes down as the second best since

Duke Dick

boarded a helicopter and waved bye-bye.

Higher mortgage rates surely have something to say about the recent sag in sales -- new units are down about 3% from their peak; pre-owned ones are down roughly 9% from theirs -- but there's also probably a supply factor at work here. The stock of newbies available for sale now sits at an ultra-low 4.1 months (about half a month more than its all-time low; this thing was clocking in at 8 as recently as 1994), and the stock of existers sits at a rock-bottom 2.8 months (close to the record low of 2.6 it hit in January). The fact that prices are still rising suggests (at least to this correspondent) that supply's probably the more dominating force here. Meantime, mortgage rates have dropped by a quarter of a percentage point since they peaked during the third week of February, which, even if it doesn't serve as stimulus, removes at least a little demand drag.

Also worth keeping in mind: The economists at

Goldman

raise a great point about house prices by noting that an especially huge gap's opened up between the real-world and the gubmint's measure of housing costs. Specifically, equivalent

rent is currently

rising at a 2.6% year-on-year rate, which leaves it four full percentage points shy of what's actually happening (see table). This goes down as the biggest such chasm in 13 years, and Goldman's work shows that such gaps have historically proven reliable guides to the direction of the OER numbers. The economists conclude that "an acceleration of CPI housing costs is about as likely as economic forecasts get."

It's probably already happening right now (albeit very gradually): The year-on-year increase in equivalent rent has accelerated to 2.6% in March from 2.3% in October (which marked a cyclical low). The risk here, of course, is that the gubmint numbers begin to play catch-up rather quickly, in which case the core price index would also accelerate at a stepped-up pace. Equivalent rent accounts for roughly 20% of the total CPI, mind you, so chunky increases there spell upside risk for the core price measures.

And you can probably think of a few people who wouldn't be overly happy about that.

Anyway.

Let's end with opera.

Mid pleasures and palaces though we may roam

Be it ever so humble ... there's no place like home.

Side Dish

Used to be that I could get more than half the vote with a "you suck" option. You guys are getting

sissy on me.

Cut it the hell out.

And hey. All apologies for the lack of email response lately. Just been traveling a bunch and way jammed in general.

I do still love you. A lot. I promise.

A standing ovation for Rocker?

Oh Ted. Oh Jane.

Genuinely disgusting.

Elian looks an awful lot like Chipper.

Bring back William Tecumseh Sherman.

Get me to D-battery night at Shea in June.