Amazingly, financial reporters still are reluctant to say the American economy is in recession (which it most obviously is). Hence when inflation fully shows its ugly face, expect housing prices to catch up with oil which already accounts for the dying dollar (a currency no longer carrying much weight with OPEC as a basket of currencies is being embraced and the Euro and yen are taking preeminence).
Undoubtedly inflation and the recession caused by it shall weigh heavily on the Fed and we the American people. Since it seems financial reporters are usually about a year or two behind the actual occurrences in the market (that is reporting them honestly to the general public), always choosing to use colorful and positive language, it may be another year or two until we see the true signs of inflation in the real estate market. A big spending, pro-inflation government however will always prove inflationary when it comes to U.S. currency (since this sneakily reduces their repayments).
The U.S. economic forecast remains bleak to say the least. Latest reports released show that consumer-level inflation remains steady, while the housing slump shows no signs of improvement.
The U.S. consumer price index (CPI) rose 0.3% in March while the core rate, which excludes food and energy prices, was up 0.2%, following flat readings in February.
Energy prices are rising at a 17.0% year-over-year pace. Gasoline prices rose 5.2% and are up 26.0% from a year earlier.
Recent inflation reports underscore and highlight the the Federal Reserve’s ongoing challenges. “Ongoing hefty gains in headline prices will continue to needle (policymakers) despite the Fed’s near-term focus on economic risk, as the Fed faces an inflation problem that may have greater shelf life than the problems in the financial industry,” says Action Economics.
U.S. housing starts plunged 11.9% to a 0.947 million annualized rate in March, though after an upwardly revised 1.075 million pace in February (1.065 million before). Markets expected a more modest fall to 1.003 million. Starts are down 36.5% over last year. Permits fell 5.8% to a 0.927 million pace, and are down 40.9% over last year.
Contracts for housing will remain dismal as the recession deepens and the media hype dies down to the tune of reality.