House Price Inflation in CPI is of Course Complete Baloney, but it Accounts for 1/4 of Total CPI

by Wolf Richter
Wolf Street

With actual house price inflation based on market data, overall CPI would have jumped by 3.7%. Lifting the cover on the deception to keep CPI low.

For most Americans, housing costs are the largest item in their budget, ranging from 30% to 60% of their total monthly spending. In its Consumer Price Index (CPI) for February, released yesterday, the Bureau of Labor Statistics reported that the costs of homeownership (which the BLS calls “Owner’s equivalent rent of residence”) have increased by just 2.0% from a year ago, and that rents (“rent of primary residence”) have increased by 2.0%. They’re the biggest items among the 211 items in the CPI basket and together account for about one-third of overall CPI. They play a huge role in CPI. So…

Rent inflation of 2.0% year-over-year on average across the US might be roughly on target, from what I can see in other rental data. But homeowner’s inflation of just 2.0%, given the skyrocketing home prices? Ludicrous. In its latest release, the Case-Shiller National Home Price index jumped by 10.4%.

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