The article at BOP news is coming with critics of the way feds are counting housing price in inflation. The official housing inflation for New York is just 1.9%, because this is how much the renting had changed. Seems like nonsense?

I don’t think I agree. It depends on the statistical mix of the effect of the housing bubble on people.

If you think about the most unlucky category – first-time home buyers – who now have to toss $1.1 mil for an average NYC apartment instead of $900k it used to be, those poor fellows are hammered by 20% inflation, if you can call “poor? those who can shed a million for a piece of brick.

If you take another person, who’s home added $150k in price in the last 2 years, who can now sell it and rent back for $2,500. The capital gain of this sale will pay for 5 years of rent. If the amount of people who plan to do that will become statistically material, it sounds like a blatant deflation to me.

But the most typical case would be a family that sold cheaper home and moved into bigger one simultaneously cashing out some money and switching to adjustable mortgage. Those folks will feel inflation as soon as prime rate kicks in. How to count that? I have no idea…