The Investor’s Business Daily runs with a front page article dismissing deflation risks because if you “strip out rent costs, which accounts for 40% of the core CPI, underlying inflation is 2%.” The question is, why exclude rents? Shelter is the most important cost in the consumer basket, and rents do indeed tell you a lot about the economy — especially how lingering high unemployment is influencing the demand for residential real estate. The line of thinking is so flawed; it reminds us of all the economists telling everyone in 2008 that once you exclude housing, it’s all good. No slowdown at all. Geez — great advice. ---Rosenberg, ibid
I agree with Rosie, but, this statistic is nevertheless notable. The housing problem is not going to magically get better soon. One thing to consider is that there is -no- private mortgate industry. It's all GSE's. I don't think we can have any robust or even vaguely healthy housing industry when the only entity financing houses is the government (leaving the grand morality of it aside).
On the other hand, the above stat lends a small amount of credence (small) to the inflationistas and deficit hawks who constantly and dramatically fail to be right in predicting an inflationary blow-off.