Tuesday, March 25, 2014

The "There Is No Inflation" Report (Real Estate Edition)

More than 40 percent of the homes for sale in metro San Francisco are now asking more than $1 million, reports WaPo.

That figure, according to WaPo, comes from Jed Kolko, the chief economist at the real-estate tracking site Trulia, who has calculated a similar share for each of the 100 largest metros (xlsx) in the country. San Francisco is not surprisingly on top:

It should be obvious that Fed printed money is landing first in the greater Silicon Valley area and in the greater NYC area (including hedge fund country, Fairfield County, CT). The money will eventually works its way through the rest of the country, though not as dramatically. As of now, in 68 of the 100 largest metros — including Chicago, Philadelphia, Atlanta and Dallas — million-dollar homes comprise less than 5 percent of what's on the market. They make up less than 2 percent of for-sale housing in 44 of the largest metros.


  1. I prefer the chicken nugget index: a 50% increase since 2007.

  2. This article brought up a question in my mind:

    Someone who foresaw the fed-fueled real estate boom in Silicon Valley could buy property low, and sell high once their prediction came true. Is that person in the wrong to make money off of predictions arising from government or quasi-governmental actions? Certainly, the profits of such investments were realized in "dirty" dollars if it came from a loan made possible by Fed policy (albeit laundered through the banking system ultimately providing the loan!).

    Companies which deal directly with or contract heavily with the government are reprehensible- the money is, of course, stolen loot. Thomas DiLorenzo calls this political entrepreneurship:


    But, should the employee of such a company be scorned, as well? As well, the real estate investor making money (increasing demand) on monopolistic Fed counterfeiting?

  3. Let Them Eat iPads: 14-Years Of Data Debunk Fed's Inflation Shortfall Canard

    So not surprisingly, during the past 168 months running the rate of inflation according to the Fed’s preferred measure called the PCE deflator has come in exactly at a 2.0 CAGR–the annual rate embedded in the 14-year index gain of 31.65% shown in the table below. You might think the paint-by-the-numbers Keynesians who run the Fed would be thoroughly satisfied with their inflation targeting performance—even if, as Paul Volcker cogently noted, it does mathematically result in the theft of half of a working man’s savings over his lifetime.

    Not exactly. The monetary politburo has been gumming about periodic bouts of too-low inflation and even “deflation” ever since Bernanke arrived in 2002. Yet unless the Fed’s unrelenting pursuit of “mission creep” has led it to the conclusion that its mandate under the wholly elastic and content-free Humphrey-Hawkins Act requires hitting its quantitative targets on an annualized seasonally-maladjusted basis every week, there is not a hint of inflation shortfall during the entire 21st Century to date.

    In fact, the table below address the cost-of-living increases that have been endured by that substantial share of the public which has eaten or consumed fuel sometime during the past 14 years. At best, according to the official CPI—which is apparently good enough for 50 million Social Security recipients— the cost of living has actually risen by 2.4% per year or 39 percent over the period.