Today marks the fourth straight month in a row that the S&P Case Shiller Home Price Index Composite has missed economist estimates, as a growing chorus of financial analysts call the top of the post-crisis housing rebound. The housing sector in particular has seen a rocky few weeks with the latest lopsided data highlighting this point. Existing home sales in particular have slid demonstrably although they were reasonably offset by the latest new home sales figures. However, the importance of the housing sector cannot be underestimated as it still remains the primary component of US household wealth and a major barometer of economic health for retail investors. Nevertheless, times are changing as is the trend of American home ownership with the figure ebbing near its lowest level since 1967. The gradual erosion of the American middle-class has accelerated in recent years as the labor economy transitions from full-time to part-time and the housing economy shifts from ownership to rental.
As the Federal Reserve remains data dependent in its approach and outlook for interest rates, the housing component should play a critically important role in the decision. While current inflationary measures show the shift in prices is more emblematic of deflationary tendencies, the reality for most American households is that housing-related costs are rapidly growing and creating stealth inflation. With the highest level of Americans renting in decades and rents increasing owing to newly minted corporate landlords, costs are on the rise and inflation is prevalent for a large segment of American households. The Case-Shiller home prices index may show US home prices growing at quite the pace, with the latest print showing 5.00% annualized expansion. However, the coming demographic shift and retiring baby boomers are likely to disrupt the trend as more home owners look to sell in coming years, and younger generations are left without options outside of renting due to deteriorating economic conditions.