Today’s podcast goes over the recent events in the economy. It shows an obvious storyline to me, at least on why the Federal Reserve has abandoned the Housing Market to fend for itself.
On CNBC yesterday, I tried to convey that inflation in America is not so much about home prices but rents, so the growth rate of prices slowing year over year doesn’t mean anything in the inflation fight. The Fed is targeting the labor market, which is what they believe is the best way to defeat inflation by creating higher unemployment, as they have talked about for a while now.
Here is a clip of the interview: https://www.youtube.com/watch?v=c0VrpsC4cYE
Remember that during the Housing Bubble Years 2002-2005, we saw the massive home price and credit growth, but core PCE was below, on par, or slighly higher than the 2% Fed Target.
This is because Shelter inflation wasn’t booming back then as it is now; this is about rent, not home prices. The big difference now is that rent inflation took off, where it didn’t happen during 2002-2005. Of course, rent inflation can’t sustain its hot pace, but the CPI data lags badly, something I talked about on CNBC back on September 13, 2022, when the CPI report came out.
Here is a clip of that interview: https://www.youtube.com/watch?v=XiNBrYmVybo&t=18s
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Today I wrote an article about what Housing Credit would look like when the next recession hits.
“Keep your face always toward the sunshine and shadows will fall behind you” Walt Whitman
Logan Mohtashami is a Lead Analyst for Housing Wire, a financial writer, and a blogger covering the U.S. economy with a specialization in the housing market. Logan Mohtashami, now retired, spends his days and nights looking at charts and nothing else