Housing and Inflation

Economist: Housing costs comprise 30% of the core inflation indicator (CPI) used by the Fed. Because the recent run-up in home prices is not reflected in increased rental costs, you get very different results for the core CPI if you use home prices (cost to purchase a home) instead of rental cost in the calculation. You could argue this means that US inflation is much higher than previously thought. I prefer to see it as yet another indication of a housing asset bubble.