CAPEX continues to run at record levels, at least in nominal terms. But the pandemic housing boom is definitely over (for good or for ill). Housing transactions are back to the pre-pandemic trend, and below it as a share of nominal GDP.
What you're not hearing about the US housing market and the future of inflation
Tuesday, February 28, 2023
The post-pandemic housing boom is more than over, and so is inflation.
Update to Strategic View
The TrendMacro Housing Transaction Value Aggregate has fallen to below the pre-pandemic trend after a stimulus-driven all-time high. The new homes component only matched the bubble-era level, and has merely fallen back to trend. But the existing homes component far exceeded the bubble-era level, and is now well below trend, dragging down the entire Aggregate. As a share of GDP, the Aggregate never even approached the bubble-era level. As a boom, not a bubble, its reversal will not have the consequences that led to the Global Financial Crisis. Shelter prices, the largest component of CPI, is highly correlated to the Aggregate with a lag. With the Aggregate having sharply reversed, shelter inflation, which is propping up CPI, will sharply reverse and CPI will quickly return to the Fed's target.