CPI Housing Costs Remain High But Industry Data Disagrees. Here’s Why

That may be true, but it also introduces a statistical lag in the SPI’s housing cost estimates. That can be a problem at turning points in the housing market as we’re seeing now. The CPI will be slow to reflect falling housing costs, if indeed home prices do continue to decline, because of the sampling method used.The Fed is aware of the implicit lag in the CPI’s housing cost calculations, in fact Chair Jerome Powell has spoken about it.

That’s running considerably lower than the headline inflation numbers. However, supercore inflation is a relatively narrow set of services, representing about 20% of household purchases. As such, this has the potential to deviate substantially from overall U.S. price trends. Still the Fed currently values it currently as a measure of sticky inflation as it tries to assess the level inflation may trend back to over time.January CPI data is unlikely to comfort the Fed.

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