Image courtesy of Case-Shiller and the BLS, chart by MishChart Notes

Not Inflation?Economists consider homes a capital expense, not a consumer expense. On that basis homes are not in the CPI. It’s a serious ongoing mistake.Four Measures of Inflation Percent ChangeI created the above chart by substituting home prices for OER in the CPI.As of April. year-over-year PCE inflation was 2.68 percent, the CPI was 3.37 percent, the CS-Adjusted CPI was up 4.07 percent and the Case-Shiller 10-city adjusted CPI was up 4.49 percent.Real Interest Rates We can calculate real interest rates by subtracting inflation from the Fed Funds Rate.Prior to the Great Recession, real interest rates were -4.58 percent creating the then-biggest housing bubble in history.In response to Covid, the Fed slashed interest rates to zero and real interest rates plunged to a negative 11.27 percent. The bubbles you see in the lead chart are a direct result of terrible Fed policy.Real interest rates are now a positive 1.26 percent, but that’s not close to the positive 4.07 percent that popped the housing bubble in 2007.The Fed’s Big Problem, There Are Two Economies But Only One Interest RateOn February 20, I commented The Fed’s Big Problem, There Are Two Economies But Only One Interest RateThis post is an update but the Fed’s mistakes are the same.Existing Home Sales Drop Slightly But Median Price Hits New RecordExisting-home sales declined 0.7 percent in May. It was the 22nd decline in 28 months. But the median price hit a new record. Existing-home sales courtesy of the National Association of Realtors (NAR)On June 21, I commented Existing Home Sales Drop Slightly But Median Price Hits New Record

The NAR reports Existing-Home Sales Edged Lower by 0.7% in May as Median Sales Price Reached Record High of $419,300

Median prices do not reflect the number of rooms, square footage, amenities, or lot size. Case-Shiller is a better measure because it factors in all of those. But CS is a slower measure.Where Do We Put 8 Million Illegal Immigrants?On May 23, I asked Where Do We Put 8 Million Illegal Immigrants?

Millions of immigrants keep pouring in. New residential construction has stalled and multi-family construction is in decline. Completions are rising, but is that enough housing?

One of Every Five New York City Hotels is Now a Migrant ShelterOn June 2, I noted One of Every Five New York City Hotels is Now a Migrant Shelter

New York City hotel prices have never been higher. Illegal immigration is part of the reason why. Mayoral graft is another.

Don’t worry, LA has the affordable housing solution starting with “affordable housing units at $600,000 each to house 278 homeless out of 75,518 in the county.Please note A New High-Rise Building Will House the LA Homeless in $600,000 Units

If the county were to shelter the 75,518 homeless, the cost would be $45,310,800,000. That’s $45.3 billion, excluding free property taxes, case workers, maintenance, utilities, insurance, food, police, clothes, doormen, or medical care.

And it would not stop there. Every homeless person in the state would move their tent to LA to participate.

This dear woke fans is what’s known as “affordable housing”.

Clearly, the proper solution is to do the same thing for 8 million illegal migrants. After all, free food, free clothes, and free shelter is a right.More seriously, the economy is slowing on many fronts. But that slowdown has yet to impact home prices.Nonetheless, weakness is pervasive and recession looking.Job Openings vs Unemployment Looks Very Much Like a Recession Has Begun Job openings and unemployment level from the BLS, chart by MishFor discussion, please see Job Openings vs Unemployment Looks Very Much Like a Recession Has BegunUnemployment is rising and job openings have crashed. It looks recessionary.More By This Author:Sorry Green Energy Fans, Net Zero Is a Very Unlikely OutcomeIs Globalization Dead? Two Views, Brad Setser’s And Mine A $5 Meal Deal At McDonalds, Price Wars Also At Starbucks, Walmart, Target