Inflection Point Alert: Tracking Housing Affordability Through tThe CUSR0000SEHC/M2 ratio serves as a unique lens to evaluate the dynamics between housing costs and the broader monetary environment. This ratio compares the Consumer Price Index for Owners Equivalent Rent of Residences (CUSR0000SEHC) to the M2 Money Supply, providing insights into housing affordability relative to the amount of money in circulation.
Key Observations:
Declining Ratio Pre-December 2021 - Prior to December 2021, the ratio was on a downward trajectory, suggesting that housing costs were not rising as quickly as the money supply. This could have been indicative of increased housing affordability or a result of loose monetary policy.
Inflection Point in December 2021 - A notable change occurs in December 2021, where the ratio starts to rise. This inflection point signals a potential shift in housing affordability, indicating that housing costs may be rising faster than the money supply.
Policy and Market Dynamics - The inflection point could be attributed to various factors such as changes in economic or monetary policy, or shifts in market demand and supply for housing.
Implications:
Economic Policy - Policymakers and investors should pay close attention to this trend as it could have broader implications for economic policy, including interest rates and housing market regulations.
Investment Decisions - For traders and investors, this could serve as a leading indicator for sectors sensitive to housing costs and interest rates.
Public Awareness - For the general public, understanding this ratio can offer insights into the future trajectory of housing affordability, a key component of the cost of living.
Conclusion:
The CUSR0000SEHC/M2 ratio offers a nuanced view of the interplay between housing costs and monetary conditions. The recent inflection point warrants further investigation and could be a harbinger of less affordable housing or changes in economic conditions. As such, it serves as a valuable tool for policymakers, investors, and the general public alike.
