Existing home prices climb another one percent in August according Case-Shiller data released today. Case-Shiller lags but it’s the best measure of home prices readily available.

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Case-Shiller, OER and CPI data from St. Louis Fed, chart by Mish

Chart Notes

• National and 10-City Case-Shiller home prices hit new record highs in August.
• OER, CPI, and Rent are indexes measured by the Bureau of Labor Statistics (BLS).
• OER stands for Owners’ Equivalent Rent. It’s the price one would pay to rent one’s own house unfurnished and without utilities.

Case-Shiller measures repeat sales of the same home over time and the indexes attempt to weed out major home improvements.

Case-Shiller is a far better measure of home prices than median or average prices which do not factor in the number of rooms, location, lot size, or amenities.

Case-Shiller Home Price Index National and Top 10

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Case-Shiller data from St. Louis Fed, chart by Mish

Not every city is at record highs although the national and 10-city indexes are. However, the price in all 10 cities increased in August.

Four Measures of Inflation Percent Change From Year Ago

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Real Interest Rates

I created the above chart by substituting year-over year increases in the Case-Shiller index for OER, the largest component in the CPI.

With the Fed Funds rate ay 5.33 percent, real interest rates are positive by all measures. For example 5.33 minus 3.68 yields a real interest rate of 1.65 percent.

How the Fed Destroyed the Housing Market and Created Inflation in Pictures

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As easily seen in the lead chart, home prices have surged far more than rent, OER, and the CPI. Prices remain high but mortgage activity is at 30-year lows.

For discussion, please see How the Fed Destroyed the Housing Market and Created Inflation in Pictures

The Fed will have a very difficult time escaping the mess it has made. If the Fed lowers rates, the housing bubble will blast even higher. But if it doesn’t, existing homes sales transactions will remain in the gutter.

Also see Fed Chair Jerome Powell’s half-baked admission What the Fed Could Have Done to Prevent Inflation Rise.

There’s plenty of blame to spread, but especially the Fed, for creating the artificial boom in housing.

Hello Mortgage Broker Employees, We Want Your $100,000 Signing Bonus Back

The ramifications of the Fed’s error keep piling on.

On the basis that signing bonuses were loans, a mortgage company with the ironic name “Guaranteed Rate” is demanding ex-employees return their signing bonus, some up to a million dollars.

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