As you can see, house prices in the US, on the national level, are at all time highs.

In fact, they have been making new all time highs since 2016, when the index surpassed its previous high made in 2007, just before the Great Financial Crisis.

House prices fell for about 5 years, bottoming out in 2012, after which they embarked on an as yet uninterrupted move upward. Interestingly, they raced even higher in Pandemic 2020, ignoring the widespread economic pain and uncertainty sweeping through the labor market.

Why would this be?

While we may never have a definitive answer given the complexities of the systems involved, let us consider the impact of three seemingly disparate things: low rates, labor market bifurcation, and unequal access to capital.

Simply put, low rates have allowed those with capital and those with easy access to capital, i.e. those not locked out of the labor market after ’08 and March/April 2020, to live in completely different realities to those who were locked out.

Being able to remain in the labor force is not as simple as being a “good thing” because one has a job.

Being able to be employed and remain consistently employed means that one can access bank credit, in the form of credit cards, consumer loans, and mortgage lending – these are the “lucky labor few”.

Those lucky enough to have access to all of these get to enjoy the low rates that QE and historically low economic growth have combined to create. 

This unequal access to credit can be observed in the Housing Credit Availability Index (HCAI), which, in stark contrast to US home prices, is at all time lows.

In other words, US house prices are at all time highs, even as record numbers of Americans cannot easily obtain a mortgage from a bank. 

Therefore, we have inflation in places where the lucky labor few have easy access and the unlucky labor few do not, capital markets (both public and private), as well as housing. 

In the statistics that include the unlucky labor few, like CPI/PCE, disinflation, and even the odd deflationary episode, is the order of the day.

As such, the bifurcation of the labor market has created much more than have and have nots. It has, and continues to create, can always haves and can never haves. 

This labor force problem has been going on since the GFC, and QE has been going on since 2009.

QE has not helped the labor problem at all. The lower borrowing costs that it contributes to has not led to bringing folks back into the labor market.

Instead it has  exacerbated the divide between those with access to credit and those that do not.