The real inflation rate in the United States

The government uses what’s called the core inflation rate to measure inflation, but, what most people don’t realize is this rate doesn’t take into account energy and food prices!  Obviously, for me, not taking into account these critical components, what good is the government’s inflation rate?

The real inflation rate

Well, here’s some interesting information about the core inflation rate, the way it was calculated was changed in 1980, than it was changed again in 1990. So if you calculate today’s rate of inflation based on the core inflation rate that was in effect in the 1970’s, instead of what the government is telling us now, about 8.6, I believe the inflation rate based on their own formula back in the 1970s would be more like 17 or 18%!

But really, how it is calculated, and what its components are, is not really that important for the average person. Because, the average person who owns an automobile and either owns or rents a house and buys their own food, knows that today’s inflation rate is nowhere near 8.6%! Here in Phoenix, Arizona I would say, today’s real inflation rate is somewhere above 20%!

Okay, I know I’m not being scientific here, but some of my observations in the Peoria Arizona area, give me a better handle on the true inflation rate then what the government is telling us.

Here are a couple of examples, a local very popular Dollar Store here a couple of months back changed all their prices to a $1.25! Well, this one is easy, that’s a 25% jump!

A big supermarket chain here selling large bottles a seltzer water, just a couple of weeks ago raised their price from 88 cents a bottle to 99 cents a bottle, that’s a 12.5% increase. Avocados that were $0.50 a piece a month ago, are now $0.79, a huge 50% increase!

Perhaps the real inflation key is gasoline. The national average gasoline price in January of 2021 was $2.39 a gallon. Today, according to AAA the average gas price is approximately $5.39, or an increase a $3 a gallon.  Yes, this gasoline price increase is over 125%!

So, in my overly simplistic local area observations of inflation, if I take an average of the four examples noted above, this comes out to a inflation rate of over 31.4%!

Well, I guess I now know why the government’s calculation for inflation leaves out food and gasoline prices!

Keep in mind, that even though  I’m a license California real estate broker,  after retiring out to Arizona, I am no longer representing clients. Yes, I have no horse in this race, just reporting my thoughts and personal opinions from over three decades a residential real estate experience!

To wrap this up, I think that many areas that have seen astronomical, irrational home price appreciation over the past couple of years, are now going to see a similar but reverse price depreciation!  I think in many local markets, this depreciation will easily exceed 20% or more from the market tops!

There is a perfect storm forming in America. inflation, severe drought in the farm belt, the pandemic, food shortages, diesel fuel costs, and heating fuel shortages, baby formula shortages, shortage of and price of available cars, and the price of housing. It’s all coming together and could lead to real disaster for our economy.

Always keep in mind, that purchasing or selling a home is a major lifestyle decision, and as such, should not be rushed into. So, by all means, if you’re considering purchasing or selling real estate in today’s market, do your own homework and draw your own conclusions! But, also consult with your legal & financial advisors prior to making your moves.

My opinions here are just that, opinions!  The fact that I’ve been in the residential real estate market for over three decades, does not mean that my opinions are going to be any more accurate then your mother-in-law’s opinion, though I sure hope they are!

For those of you who may not be regular readers here is the link to the first warning blog post that I put out; my first post where I called the real estate market top was June 15, 2021 (https://brokerforyou.com/brokerforyou/real-estate-market-downturn/ ) . On June 17 I had a follow-up post ( https://brokerforyou.com/brokerforyou/real-estate-market-bust/ ) where I added additional indicators, that to me showed that the market was in a topping phase right now! I put the links to each one of those prior post above, and would suggest if you’re interested, to reread those posts!

Buckle up your seatbelt because the downward ride for real estate values has just started!

#######

• Brokerforyou.com is for SALE

  Just like most major businesses, the easiest way, and the fastest way to expand your business and influence in your particular market is through strategic acquisition. Just look at Google, they are the number one search engine in the world! Google bought Youtube in November 2006 for US$1.65  billion! YouTube now operates as one of Google’s subsidiaries.

  www.brokerforyou.com is for sale and is offered with a very popular San Diego residential real estate channel with 1.16K subscribers and 114 videos!!

  What’s the approximately monthly cost to host a website?  With shared hosting, you’re hosting fee can break down to about 10 to $15 per month. To keep your url registered (that’s your site address), this is usually paid on a five to 10-year basis, which averages out to about just a dollar per month!  Naturally, if you add direct hook-up to a MLS database, that provides lead capturing, this costs can vary greatly from provider-to-provider.

  Interested, call Bob Schwartz (619) 286-5604 for additional information

• #######

  home water leak detector – https://flumewater.com?grsf=w79pta

  

  +++++++++++++

  Great DRONE Value