The dollar’s purchasing power is waning, but the CPI ignores house price inflation.

Through Wolf Richter for LOUP STREET.

House prices rose 11.2% from a year ago, the biggest increase since the real estate bubble 1 peaked in 2006, according to today’s report. National Case-Shiller Home 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 the month. same house when it has sold previously, thereby tracking the dollar amount it takes 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 “Rent Equivalent to Owner’s Residence,” which is about 25% of the CPI, is based on homeowners’ estimates of how much their home will pay. to rent for. This CPI for “Owner’s Residential Rent Equivalent” increased only 2.0% year-on-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 risen 136% since January 2000, including the drop in the middle, of which l The CPI for homeowners rose 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 rising, but only part of it is included in our inflation measures, making the CPI an estimate of the loss of purchasing power of the dollar in a sad joke.

Los Angeles – the most splendid real estate bubble # 1:

Prices for single-family homes in the Los Angeles subway rose 1.0% in January from December and 10.8% year-on-year, according to the Case-Shiller Index. The Los Angeles index value of 321 indicates that subway house prices have risen 221% since January 2000, more than tripling in 20 years, making Los Angeles the most splendid real estate bubble on this list. . Earlier today, I discussed the different trajectories of condominium prices and house prices by price brackets.

All graphics below are at the same scale as Los Angeles. As we move down 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 San Diego Metro Case-Shiller Index rose 1.4% in January from December and 14.2% from a year earlier. Prices have more than tripled (+ 202%) since 2000:


Seattle subway house prices jumped 1.4% in January from December and 14.3% year-on-year, making it the second-fastest annual house price inflation among the Splendid. Housing Bubbles here, behind Phoenix (15.8%, below):

San Francisco Bay Area:

It’s here that condominium prices have fallen back to 2018 levels, but single-family home prices were up 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 the counties of the Bay Area of ​​San Francisco, San Mateo (northern part of Silicon Valley), Alameda and Contra Costa (East Bay) and Marin (North Bay):


In the Miami metro, house prices rose 1.2% for the month and 10.4% year-on-year. Although they have increased 173% since 2000, they remain just a bit below the insane peak of the real estate bubble 1:


In the Portland subway, house prices rose 1.1% for the month and 10.6% year-on-year:

Washington DC:

Washington DC subway house prices rose 0.8% for the month and 10.7% year-on-year, after passing the peak of the housing bubble 1 at the end of last year:


In the Boston subway, house prices rose 0.8% for the month and jumped 12.7% year-over-year:


Home prices in the Tampa subway rose 1.1% for the month and 11.9% year-on-year:


Denver metro house prices rose 1.0% for the month and 10.0% year-on-year:


Phoenix subway house prices jumped 1.5% for the month and 15.8% year-on-year, making Phoenix the market with the highest annual house price inflation 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-on-year. As I explained earlier today, there were big differences across price points, with low-level housing prices increasing 14.9%, but condominium prices stay in the same narrow range for three years. The Case-Shiller Index for New York City covers New York City 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-on-year:


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-on-year, and have increased 110% since 2000, meaning house price inflation has reached 110% over the past 20 years. In the remaining handful of cities in the 20-City Case Shiller Index, 20-year house price inflation has been below 100%, making Dallas the latest entry on this list of the best real estate bubbles:

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