Consider a riddle: What is the thing that sounds like inflation but isn\u2019t, and is in fact nearly impossible to disprove with data showing inflation has cooled? It\u2019s \u201caffordability,\u201d the B\u00eate noire of incumbent politicians and the emerging political buzzword of 2025\u2014and potentially far beyond. <\/p>\n
Affordability emerged<\/a> as the common theme of Democrats\u2019 sweep of the November off-year elections, with progressive Zohran Mamdani of New York<\/a> and centrists Mikie Sherrill of New Jersey<\/a> and Abigail Spanberger of Virginia emphasizing its importance. Most recently, the Mamdani-like Katie Wilson of Seattle<\/a>, a 43-year-old never elected to any office before, rode affordability to a shock victory in the Emerald City\u2019s mayoral race.<\/p>\n One leading economist, Paul Donovan of UBS, warned on Friday that the term \u201caffordability\u201d is a slippery concept, and the politicians benefitting from it today may be fighting against it tomorrow. It simply has an anti-incumbent bias. Donovan notes that affordability is a deeply subjective measure, often wielded as a political tool rather than an objective economic indicator. For politicians seeking to win over voters, the temptation is to promise solutions, even when these promises are based on poorly defined or shifting benchmarks fueled by social media narratives.\u200b<\/p>\n Social media platforms have emerged as powerful, narcotic influences, fueling a dangerous kind of FOMO feeling. That can influence perceptions about the economy as well.<\/p>\n \u201cAffordability also includes some kind of aspiration,\u201d wrote Donovan, global chief economist for UBS Wealth Management, on his weekly blog<\/a>. \u201cPeople want things (generally \u2018better\u2019 things than they currently have) and are upset that they cannot afford those things.\u201d<\/p>\n When social media presents an idealized image, he added, this \u201cfuels resentment about a lifestyle that cannot be afforded.\u201d He warned that affordability\u2014and therefore affordability politics\u2014may become a more enduring problem than in the past, lingering in the culture. <\/p>\n Inflation can be low, but affordability can remain out of reach<\/p>\n The sentiment \u201cI cannot afford that\u201d is central to anger at this moment in time, according to Donovan, and this rests on an emotional response to the economy that is difficult to reconcile with data showing that inflation may have in fact cooled in backward-looking data. <\/p>\n \u201cWhile inflation is a general increase in prices, affordability is normally directed at specific, large expenses such as home ownership. Consumer price inflation is a plutocratic statistic, biased toward high income groups\u2019 spending patterns,\u201d he explained. \u201cAffordability, being political, is democratic.\u201d <\/p>\n So even when inflation isn\u2019t surging by economists\u2019 metrics, the perception of inflation can still make voters angry. Amherst Group CEO Sean Dobson attempted to explain this dynamic in a recent interview with Fortune, saying that inflation as measured by the Federal Reserve is very different from what consumers experience.<\/p>\n \u201cThey [the Fed] measure the inflation at the time it\u2019s felt by the consumer,\u201d he said on the sidelines of the ResiDay<\/a> conference in New York, meaning that inflation can be relatively stable month-over-month from a statistical perspective, but if someone needs to rent a new apartment or buy a house, they get sticker shock from how much prices have gone up over several years, due to spurts of inflation that are now in the recent past. \u201cSo, everyone\u2019s right that the Fed is late because the actual economy\u2019s going down [in inflation], the rent growth\u2019s going down a while ago. But that rent growth doesn\u2019t hit everyone in real time.\u201d<\/p>\n From the Fed\u2019s perspective, Dobson added, \u201cthey can\u2019t make policy based on a projection. They have to do it based on the hard, backward-looking data.\u201d But in the consumer\u2019s mind, they experienced no inflation for something like three lease renewals in a row, and then the next time their lease came up for renewal, \u201cthe same house cost 100% more. But in between that was all the gradual inflation that wasn\u2019t measured.\u201d<\/p>\n Onstage at ResiDay, a member of the Trump administration sounded angry at this dynamic. Bill Pulte, director of the Federal Housing Finance Authority, called into the conference and argued forcefully<\/a> that inflation is cooling in the data, and the Federal Reserve is blind to the plight of most Americans\u2019 affordability concerns. Federal Reserve Chair Jerome Powell isn\u2019t \u201cnot looking at the data\u201d which shows that \u201cinflation is way lower.\u201d The high mortgage rates above 6% are \u201creally hurting a lot of people,\u201d Pulte added. \u201cIt\u2019s sad.\u201d<\/p>\n Within days, Pulte was celebrating a government initiative as a \u201cgame-changer\u201d: the idea of a 50-year mortgage<\/a>, floated as something to make housing more affordable. Several projections cast doubt on that idea, including a UBS calculation<\/a> that a 50-year mortgage would save about $119 on a monthly mortgage bill, but the interest costs would be roughly double over the life of the loan compared to a 30-year mortgage.<\/p>\n \u201cIt is tempting to think of affordability as another version of the \u2018cost of living crisis\u2019\u2014but affordability is subtly different, and may linger,\u201d Donovan at UBS said.<\/p>\n","protected":false},"excerpt":{"rendered":"Consider a riddle: What is the thing that sounds like inflation but isn\u2019t, and is in fact nearly…\n","protected":false},"author":3,"featured_media":383025,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4,3],"tags":[8161,7065,266,32555,50,67,132,68],"class_list":{"0":"post-383024","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-united-states","8":"category-us","9":"tag-affordability","10":"tag-housing","11":"tag-inflation","12":"tag-mortgages","13":"tag-news","14":"tag-united-states","15":"tag-unitedstates","16":"tag-us"},"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@us\/115559572637629806","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts\/383024","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/comments?post=383024"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts\/383024\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/media\/383025"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/media?parent=383024"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/categories?post=383024"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/tags?post=383024"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}