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Crucial US Inflation Report Could’ve Been Worse
US consumer prices rose in January by more than expected compared to the same month last year. At 6.4% and 5.6%, both the headline and core gauges topped estimates.
But increases from the prior month were generally consistent with expectations. The headline index rose 0.5% and core 0.4% from December, according to heavily scrutinized data released on Tuesday.
The report included updated category weightings and methodological changes, and came on the heels of upward revisions for figures cov
I just noticed that housing prices in cities like Mesa Arizona are dropping as the water supply drops. I don’t see any efforts being initiated to build new sustainable supplies. People are starting to see the writing on the wall. They want to sell first while there may be some demand… even at a loss. From Utah to New Mexico and California, areas running out of water will start seeing a migration out. This will keep housing prices high in areas that are not facing water shortages. Demand will go up. Similar to areas that are facing rising sea levels and increased flooding, the migration is under way.
Residential water usage isn’t really the issue in those states. The vast majority of the water in California and Arizona is actually used for agriculture. It’s roughly 80% and 74%, respectively. If push comes to shove, agricultural water usage has to be reduced. That’s not to say specific locales won’t have water issues or that there aren’t implications for food costs or future development, but these states are certainly investing in ways to make better use of their water. In fact, per capita water usage in California is down significantly over the last 50 years. One study I saw estimated that total water usage has gone up only 20% in the last 50 years despite the population more than doubling in that time.
I can see why people would leave Arizona though since it’s hot as hell and only going to get hotter for several months out of the year.
“Through the roof you can’t afford”… Haha. An instant classic in my book!
This question is off topic, but do you have any plans/ideas to comment on the current stir around AI and ChatGPT at any point in the near future?
Not from a short term speculative point of view, but the structural/long term effects of that technology and how it might tie into deflationary trends, UBI, National Security etc.
If I read that correctly, these new header illustrations are all AI generated, no? I wonder what experience you have made using it.
Cheers
Looking at Case-Shiller house price index vs monthly CPI shelter
https://fred.stlouisfed.org/graph/?g=104Ko
In the Great Recession, house price peaked June 2006 and monthly shelter CPI peaked in late 2006. Looking at 2000 is unhelpful, as house price didn’t peak. In 1990 house price and monthly shelter CPI peaked about the same time. Pre-1983, the shelter CPI methodology was completely different. https://www.whitehouse.gov/cea/written-materials/2021/09/09/housing-prices-and-inflation/
House price peaked June 2022, if the 2006 relationship holds monthly shelter CPI should have peaked in late 2022, and if the 1990 relationship holds we’d have seen monthly shelter CPI peak last summer.
It is not implausible for the lead/lag relationship between house price and monthly shelter CPI to be different in 2023 from earlier peaks, just as 2006 was itself different from earlier.
Shelter CPI is mostly Owners Equivalent Rent CPI. OER is a survey of homeowners’ estimates of how much their house would rent for.
How much attention does the average homeowner pay to what other houses are renting for? Maybe about as much as the average car owner pays to what other cars are renting for. I have only the vaguest idea of the range of possible rents for houses in my neighborhood; it is wide ($3000 to $5000), formed from only a handful of listings (whatever I’ve happened to notice over the last decade), and infrequently updated (since I don’t care).
Perhaps responses to this survey are more guided by how much they think their house is worth or by impressions of overall inflation. In a period when existing housing sales volume and existing house on-market inventory are both very low, sellers are “in denial”, while overall inflation is high, perhaps OER can stay detached from Case-Schiller house prices for longer than previously.
Following up, perhaps other homeowners pay more attention to their local house market than I do. In which case, they might track not just listing and selling prices, but also mortgage rates. In a period when existing house prices decline but mortgage rates rise, perhaps their responses are guided by mortgage payments. Given how those have risen, perhaps OER can also stay detached for longer.
More broadly, why should the shelter price of houses track the selling price of houses? Should it instead track the periodic cost to the homeowner of occupying the house, e.g. mortgage payment, property tax, maintenance, excluding utilities and other occupancy costs captured in other CPI components?