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THE HOUSING MARKET’S GROWTH IS NOT THE CAUSE OF INFLATION

The Real Deal

Everything Real Estate in the San Fernando Valley
WednesdayJuly 14, 2021
THE HOUSING MARKET’S GROWTH IS NOT THE CAUSE OF INFLATION

We’ve been seeing a lot of discussion about inflation recently, and that discussion is
warranted; housing costs have increased at a break-neck speed. Nonetheless, this article posts
that it is intellectually dishonest to suggest that the increase in housing prices is part of the
necessary inflation discussion. While housing prices increased by .5% between May 2021 and
June 2021 according to the Bureau of Labor Statistics, this masks the massive 2.6% increase
between June 2020 and June 2021 (the Case-Shiller Home Price Index for April 2021 puts this
number at high as 14.6%). To put the housing market’s impact on overall inflation in
perspective, the housing market represents 20% of all inflation in June 2021.

Of course, reasonable minds can disagree about these numbers; there are significant
issues with the methodology employed to reach these conclusions. Nonetheless, anecdotal
evidence supports the conclusion that housing prices are increasing at an incredible rate.
Moreover, appreciation in the value of a home is not the same as inflation in general. Shelter is a
necessity rather than a commodity; demand for homes will never disappear, it simply reallocates
itself. Second, owning a home is not like owning something less permanent; homes are
investments, whereas consumer goods are not. Thus, tying the rise in housing prices to inflation
may be intellectually dishonest.

At the Chernov Team we understand that knowledge is power, and knowledge of how the
housing market impacts the economy as a whole is powerful knowledge indeed. At the Chernov
Team we know that whoever comes to the table most prepared leaves with the most, and the
Chernov Team always leaves the table with the most.

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