No more Choice: Live with higher inflation or start fighting with that and face stagflation!
According to the Federal housing finance agency, the US house price in January increased rapidly after the upward revision of earlier months as well. The HPI which is published by OFHEO is the House price index, the statistic designed to reflect the average change in house prices across the country or a certain area.
House price appreciation accelerated in January, with the S&P CoreLogic Case-Shiller 20-City Home Price Index (HPI) rising 1.8%. The 20-City Index is now up 19.1% compared with a year ago. Last month's index was up by 18.6%. The FHFA Home Price Index also rose more than expected in January, climbing 1.6%, or 0.4 percent, and above expectations. The FHFA House Price Index is now up 18.2% on an annual scale, while December data is also revised higher to 17.7%.
The trend of rising housing prices is not new, with increasing demand during the pandemic, demand for houses increased, especially for the suburban and exurban areas. People started to work from home, therefore they need more space in their living area, while online working does not require being close to the city centers or even big cities, therefore, accelerating migration away from high-cost housing markets in the Northeast and West Coast to more affordable markets in the South. This trend increased the house price across the country and not just in the big cities. Even the small cities with better weather and environment had more demand, and even sometimes they saw more price increases compared with bigger towns.
Since the higher demand is along with supply chain disruptions, it seems like a fundamental problem and will need more time to fix it. This problem makes fewer homeowners interested to sell their houses, while the supply of housing is tight virtually almost everywhere. And add the construction timelines now taking much longer time, due to persistent shortages of labor and building materials on top of all of them, to remember that every possible factor again increases the home prices and decreases the hope of faster rebalancing of this market.
In short, central banks in their next meetings still will be under pressure, because they have to choose either living with higher inflation or start fighting with that and face stagflation!
