I thought I’d get this out a day early since school’s out and it’s Memorial Day weekend. Happy summer everyone! My phone says it’s 47 degrees outside and it’s almost noon.
While Existing Home Sales rose in yesterday’s report, today’s New Home Sales dropped 4.7% annually. Median price for a new home is $433,500, down 1.9% from last month, up 3.9% from last year, and $25,900 higher than the median Existing Home sold. No alarming trend here, but useful data to throw around when you you want to sound smart while you’re making small talk at the family BBQ on Monday.
The graph above shows an interesting breakdown of the Consumer Price Index. Typically, the cost of putting a roof over your head accounts for about half of all inflation we experience. The cost of everything else we buy spiked out of control two years ago, but has fallen down again to below Pandemic levels. Currently, the price of “everything else” is only rising at an annualized rate of 0.27%. The second largest single factor keeping inflation high is car insurance, which is 23% more expensive than last April. Interest rates have no control over insurance premiums. By a country mile, the largest inflation factor in the CPI number is housing, which is still rising at 2.0% YOY all by itself. That number is of course wildly dependent on interest rates. So if the Fed wants to get overall inflation back down to 2.0%, dropping interest rates is the most surefire way to make that happen. Waiting for everything else to crash below 0% before cutting rates will most assuredly initiate a recession.
Now that’s a subject to get everyone around the grill talking. Have a Happy Memorial Day!
