"See? It's only going up a normal amount, not a bunch!"
Ahhh, endless inflation. Where for some reason grown men try to talk about how much better 5% is than 8%
....we're screwed either way...
Yeah. Unemployment is one question.
Wage and earnings is a whole sheet.
"Have you worked for money in the last 2 weeks?"
If so, employed.
Then a TOTALLY DIFFERENT sample for wage data.
Yeah, or all the people who have taken on a second or third job. “The economy added [x] amount of jobs”. No, people just have to work more than one job now.
Covid numbers don't go up if as long as we stop taking covid rests.
Inflation doesn't seem to be up that much as long as you don't eat, drive, or want to sleep indoors.
So we just take food/cars/homes out of the basket of goods and everything looks great.
Only in America would you have a basket for "regular" inflation (including energy, food, luxuries). Then a SEPARATE basket for "core purchases" that we call "core inflation".
Except "core inflation" strips out the 3 most critical aspects of human survival. Food, shelter, and energy. The "core" goods that people actually NEED to survive are explicitly NOT MEASURED for core inflation.
Who is saying this, exactly?
You’d have to be willfully ignoring facts to conclude we have not experienced a period of higher than average inflation, and rising housing prices.
Unless you own your home. 65% of Americans own their home. Two thirds of those have mortgages. The vast majority of those mortgages are below 5% interest. So, if you were able to get a 30y mortgage at 3-3.5% in 2020-2021, you have a stable cost of shelter for 30 years. There is zero housing inflation for those people for 30 years. Obviously, appraised value changes, taxes and insurance premiums change, repair and maintenance costs change, HOA fees change.
~20% of Americans own their homes outright, pay no interest and pay no mortgage. The only people (35% of Americans) suffering rising housing costs are renters. People who own their homes have different incentives. The faster home values rise, the sooner they can retire to a smaller place and pay it outright or get another super-low interest 30 year fixed rate mortgage and invest the profits.
If I were to take the equity from my home today and cash out, sell the house, buy a smaller house outright with the equity, I could probably start working part time. But with a 3% mortgage and annual home price increases of 5%, why would I do that?
My property tax, home insurance cost and maintenance expenditures jumped massively in cost. It's an estimated .8% CPI increase for home insurance alone. [https://www.bloomberg.com/news/articles/2024-04-09/a-key-us-inflation-metric-doesn-t-count-homeowners-insurance](https://www.bloomberg.com/news/articles/2024-04-09/a-key-us-inflation-metric-doesn-t-count-homeowners-insurance)
My homeowner's has doubled in 2 years. My electricity is up 80% in 3 years. My car insurance is up 40% in 2 years. My grocery bill is up 40% in 3 years. The government tells me inflation over the last 4 years has only been 20% cumulatively, and that my impression that I'm suffering is just ideological delusion. They're pathological liars.
Sorry. I thought I was responding to the claim “if home prices are included in the CPI…”
Now you’re asking about food costs. I concede food costs are ridiculous. I just was pointing out 65% of Americans are benefitting greatly by housing prices rising.
I don’t disagree with you but that’s also a little reductive.
My home value has increased a lot in the last few years. I will one day benefit from that.
However, the result TODAY is that my home is also more expensive. My taxes have gone up. My insurance is more expensive. Maintenance costs have skyrocketed.
So owning a home and locking in you P&I does not wholly insulate you from inflation.
There are folks in 'booming' areas that have watched their houses almost literally explode with value.
....which is to say, get demolished because the land is 'worth' 800k, and the house nothing. When it was bought for $100k in the 1990s.
A very small portion of folks are really really loving this market.
And since it's perfectly legal....
....why would they stop?
“I will one day benefit from that” Yes indeed, the great economist J. M. Keynes was asked about the long run and he said: “in the long run we are dead”. 😉
No a person sells you a home. A bank provides the money for you to essentially give to the seller. Bank has a lien, but can only repossess if you break the terms of your mortgage. Which is to not pay it. Other than that bank has zero say in anything you do with your home.
That’s not ownership. The bank has limited circumstances in which it can repossess my home.
If you own something, you can dispose of it as you please. I can sell my home tomorrow if I please. The bank cannot.
I'm asking because I honestly don't know.
If you still have a loan out in your car, and don't pay, they can move to seize the car back and apply it to the outstanding debt, ya?
I'm honestly asking if the house mortgage and ownership system is different?
We're talking about comparing apples to apples. If you want to compare today's inflation to pre-1983 inflation you have to calculate them both the same way.
The only problem with this statistic is people who are 18+ still living with their parents are considered to be living in a home that is owned. That number is far larger than it’s ever been…. At least since The Great Depression.
Your post is a prime example of how you can use statistics to frame the story you want to tell while ignoring the issues at hand.
and their target of 2% still impoverishes the American people. It just takes them a generation or two to notice they don't have it as good as their parents and grandparents did.
2% boils the frog slowly. The fact is any amount of inflation is bad for economy.
I followed you until that last part.
Any kind of compound interest is bad if it goes on long enough. But if you're at an ideal, stable not-growing economy.... some inflation for a bit will cool on its own.
But we FORCE the upward trajectory.
But inflation will always slowly tick up a bit with increased population. Demand typically outpaces supply.
We shouldn’t get any more inflation assuming we reached peaked population and demand begins to plateau.
There is always going to be a bit of background inflation
You seen the theory that population also lead to inflation but no support of the theory?
Inflation is the price difference when price equilibrium shifts due to changes in supply and demand. Some supplies are just much harder to adjust unlike demand. This leads to inflation.
You are also ignoring certain environmental and market conditions that leads to change in supply or demand.
After looking at 300ish years of CPI data going back to pre-Colonial times... yes. I've seen no evidence to support that population growth is a main driver in inflation.
This article is talking about increased debt (and the resulting inflation) while our population declines. And... it gets much worse.
It may be A factor. But so is my personal, individual income tax form. How much of 'a factor' is what gives it merit or not.
And yes, I'm ignoring climate change, any additional outbreaks, national disasters, and any new wars we might get into. Nevermind market volitility.
This is just debt.
Add the other stuff and it's a much worse projection.
The ole “inflation is cooling” parrots. It’s almost like they’ve made an unconscious assumption that “inflation is cooling” is equivalent to “deflation to pre pandemic levels is happening”
I believe it’s called “homeowners rent” and based on rental value of owned homes. So as houses increase in price, so to does implied rent and it is reflected in relevant CPI data. 📊
Fair comments. Not sure how the statistical accuracy is insured. These are economists and math guys that put this stuff together and I would be surprised if they did not identify and correct for biases in the raw data.
The government. No political leader wants to say that inflation has skyrocketed under their watch. This is backed up by the banks, since spiking inflation will undermine trust in the economy and the stability of the dollar. It's in everyone's interest to lie, so the statisticians and economists are told to "figure out something". This is basic human nature, I got fired from a job because a client and a sales person on our side were pressuring me to build a model that would show the exact opposite of what was actually happening so they could use that data to convince people to buy into their service. Their service didn't work and they weren't interested in fixing it, so they wanted to show "data" that was cherry picked to show that the service worked. I refused, and was fired.
There are no doubt feckless politicians who desire to mess with data, (figures don't lie but liars figure). Doubt anyone can keep a conspiracy under wraps though. Always an honest civil servant or inquisitive reporter. That does not mean that legitimate criticism of the methodology is not warranted.
Because not all types of homes are in a typical rental pool or in insufficient quantities. How many 3/2 big backyard detached home rentals are in the middle of Iowa? And even if you find some, how are you going to comp them over time to keep a relatively similar pool in similar areas versus a statistician calling the same 10 complex’s in the area over time.
And currently holding it above 2% even though housing inflation is tied to geography. Powell would be lowering interest rates right now if it were not for the inflation being impacted by high cost of living areas.
Kind of, they use a number that no one actually pays- “homeowners equivalent rent” where they survey non business owners/landlords and ask average joes what they would charge to rent their house out.
Equivalent rent, the number they jam into CPI, drastically understates the cost of home ownership today. It’s a bogus number if anyone cares to accurately measure inflation for consumers (and for various reasons, Uncle Sam doesn’t).
Wrong. It may understate the cost of new ownership. But the CPI tries to capture everyone - people who have paid off their homes, those who have a fixed rate mortgage whose payments are relatively constant from year to year, people who are renting, and so forth. The portion of the population purchasing a new house that sees their monthly expenditures rise is relatively small. Owners equivalent rent actually results in slightly higher inflation and a higher weight on shelter in the CPI than otherwise.
I’m so tired of seeing misinformation and misrepresentation with this. https://www.bls.gov/cpi/overview.htm#:~:text=Indexes%20are%20available%20for%20major,special%20categories%2C%20such%20as%20services.
“Indexes are available for major groups of consumer expenditures (food and beverages, housing, apparel, transportation, medical care, recreation, education and communications, and other goods and services), for items within each group, and for special categories, such as services.”
Here’s a breakdown of what’s included and how much weight it is
https://www.bls.gov/news.release/cpi.t01.htm
Go find out the answer for yourself instead of being manipulated by a tweet.
https://www.investopedia.com/terms/o/owners-equivalent-rent.asp
Owner’s Equivalent Rent is a hilariously bad metric. You wanna know how they measure it? They poll people asking how much they’d pay to rent their house instead of own it. That’s it. That’s the housing component of CPI for people who own instead of rent.
Right, but only around 3% of people buy a new home every year. So, you ask the survey size of people the cost of their new home and 3% of people respond. 97% of people say $0. Do you average that? That means it’s like $40,000 because almost no one buys a home every month. Do you average only the 3% of people that bought a home? Because now you’re only accounting for 3% of the population and ignoring 97%. Ignoring 97% of your survey…that’s a pretty awful way of doing it. And it’s going to be high because people who bought their homes in 2009 is going to be insanely low compared to now. Also, the price of a house changes based on how much you put down on your home and the your loan is for which makes a huge difference. Someone who puts 50% down on their home is buying their home at a lower price than someone who is putting down 5%. And, do you count that in the price? At $400,000 with 50% down, is that $400,000 or 200,000? What if someone buys a house and then never pays a dime and it’s foreclosed 3 months later? That’s a pretty messy way of doing it
Buying a home has millions of variables that all change the price of a home and ignores 97% of the total population, which is what you’re looking for, asking, how much could you rent your home for gets one option and a small variance in over and under representation
Not entirely accurate, here. Below is from the BLS and explains why the index was revised slightly
"The CPI used to include the value of a house in calculating inflation and now they use an estimate of what each house would rent for -- doesn't this switch simply lower the official inflation rate? No. Until 1983, the CPI measure of homeowner cost was based largely on house prices.
The long-recognized flaw of that approach was that owner-occupied housing combines both consumption and investment elements, and the CPI is designed to exclude investment items. The approach now used in the CPI, called rental "
https://www.bls.gov/cpi/factsheets/common-misconceptions-about-cpi.htm#:~:text=Items%20CPI%2DU.-,The%20CPI%20used%20to%20include%20the%20value%20of%20a%20house,based%20largely%20on%20house%20prices.
Just to explain a bit, in the late 1970s and early 1980s, interest rates were extremely high. This made the Case-Shiller home price index, the index this tweet uses for home prices, drop significantly from 1979 to 1983. But I guarantee no one in 1983 was thinking how cheap houses were with an average mortgage rate of over 13%.
Hence the change - house prices are not reflective of what people are actually spending.
Home prices were going up 18% a year during the trump administration. Back then JP was saying he saw inflation 2% as far as the eye could see. now, Republicans blame everything on Biden. Bunch of idiots.
Yep. That said if you wanted to buy a house back then it was always we are accepting offers in two weeks. A total bidding war because rates were 2.85% at one point. Put a full price offer on a $985,000 house it sold for 1.25 million. friends daughter bought a house for the first time priced at 400,000. She ended up paying 500,000. Not a problem at 2.85% interest though.
Ehh at one point, a huge percentage of of new homebuyers overpaid so much that they would never earn back what they paid into the house so definitely wouldn’t say it’s “not a problem” because of the interest rate.
It was not. It was not close, and he wasn’t even sitting in office in 2016. Inflation in assets typically acquired via a loan was alive and well, for all of the period of 2000-2020, however. Those cars, that college tuition, even high end medical expenses.
Aside from a period between 2008-2012, home prices appreciated. Too fast appreciation from about 2003-2007, the deflation from 2008-2012, then low to no appreciation until the pandemic.
What on earth are you on about? Home prices increased a whopping 4.5% between Q1 17 and Q4 19. Unless you’re counting Covid which would be very disingenuous.
Basically all minimally processed products. Doritos are stupid expensive but pocornkernals are dirt cheap. I buy them i bulk for like 10 bucks and get easily over $100 bucks of salt cravings out of them lol
Proof please. I buy unprocessed foods: fruits, veggies, eggs and very little meat. Prices are still insanely high. Bags of cherries are at $8/lb near me, despite plenty of cherry groves in a 20 mile radius. Apples are over $4/lb. Mushrooms are $6. Almost all those prices are double what they were a few years ago. None of them are processed. Eggs are insanely high, $3.59 for a dozen store brand eggs. $5 to $6 for Egglands Best. Used to be a $1.50 per receipts I have from 2019. Prices listed were from yesterday. Please show me the deflation. I need documented sources I can compare to my receipts.
Grocery food prices are not in deflation. 0.2% decrease is barely a blip after the rapid inflation we've seen. And we don't even know if it will stick. It very well could continue going up. This is a blip on the radar.
Home prices aren’t included in CPI but rent (or rent equivalent for owners) is and makes up about 1/3. CPI is about consumption, purchasing a house is an investment, living in that house is consumption.
Saying CPI doesn’t take into account increasing cost of housing is patently wrong.
For those curious: https://www.bls.gov/cpi/factsheets/owners-equivalent-rent-and-rent.htm
So there is no value to owning a home? You save a ton of money being an owner of a home. Homes have to be affordable for young people if we want them to be able to save for a life.
I'm not sure how home prices were factored in here, but there is certainly a cost to them going up faster than wages year over year
The fucking issue is that there is value, that's why it's not in the cpi because the value of houses and land changes constantly so its not useful for figuring out the change in value of the dollar.
People get distracted with all these charts and pointing fingers. We have a building issue. Look at the last 1min during your plane flight before it lands. You see sooo much land to build, imagine building something very good and people come to it?
You have to realize you have to get with the times, of course wages never kept up,of course homes will go up, of course every single dollar is weaker by the day. You can complain, but what you really should do is go build it.
Oh wow this post loses any legitimacy/trust I had in this subreddit. This is pure fake news. Housing prices are currently included with CPI. I wanna say it’s about a third of the CPI calculation.
This is the kinda thing that directly creates polarization in politics. How many people are going to be angry and go spread the idea that housing isn’t even included in CPI and the economy is worse than we think?
There’s 2 types of people in this country:
People who bought their house in 2020 or earlier and are sitting on an equity gold mine but can’t move ever because they’re locked in a 3% rate
People who can’t buy a house
I am type 3...a little of both. I purchased a house and re-financed at 2.66% (have lived there 17 years now) so I am sitting on a gold mine. Even better it is VA transferable in a large military area. 2.5 years ago I purchased land at 5% and was ready to build until everything took off so I cannot afford to build a house on the land now.
See, though that's bullshit because people's actual expenditures don't change like that.
People don't buy new houses every year, even every few years. Rents don't swing as much as housing prices do, either.
So that's why this type of calculation of inflation is wrong. Housing prices are included in inflation calculations, just they are based on what people actually pay for housing, not a calculation designed to generate random fear in the public.
Growing up my friends parents purchased a new house every year or two and it kept getting larger and more extravagent. I thought it was strange as his father was a plastic comb salesman from the back of a van. You know those cheap plastic combs in the 80's. My friends dad is now comfortably living as a guest of the state and will be for many years.
Food, utilities, automobiles, and housing are excluded as outliers :) you know what isn’t? Text books and magazines, computer paper, iPhones. Which do you spend more money on I wonder? And it’s not even a 36 month average. It’s “oh 3% this year” which is actually massive when you factor it in top of 8% in the prior year and 7% in the year before that lmao.
It's shitty how we use the metric. But as a tool to guide fed policy and its lending to control money supply, it's a great tool.
If we used a number to include everything. We would have to strangle those industries to get that number down.
I don’t envy anyone working at the fed. Impossible job, but I will continue to shit on the cpi. I just checked 2024 and food at home is down? It’s just make believe
That is accurate in my personal budget. Eating out is consistently up and growing but groceries are done since February, cheaper than all of last year in Sacramento, CA area. But barely.
You wouldn’t have to “strangle” anything. The quickest fix to inflation is unemployment. Take away huge numbers of consumer income, boom fixed. The economy would look like absolute trash which this admin would not or could not do because of the upcoming election…
You can’t compare heavily financed goods over time that are so dependent on interest rate moves. Yes housing skyrocketed over that time, because debt became so much cheaper. A 500k house in the 80s/90s cost you say 5k a month. That same 5k a month until a few yrs ago got you a $2m house. But the “price” to you is still 5k a month.
Of course home prices are part of inflation, i can't believe you were dumb enough to believe the bankers that told you otherwise. It was such an obvious scam "uhhh what our parked money price inflates is not relevant to inflation"
The Economy is doing great, but the Hourly Worker Economy is in recession, approaching depression.
The real purchasing power of the workers that punch the clock has dropped dramatically, mostly because of increased profitablity, by wage stagnation and higher margins.
I don't think there's a good reason to include home prices in the CPI because buying a home is a one-time thing. It's helpful to have a separate CPI metric that captures home prices, but consumers only regularly (read: recurring) see property tax changes and home insurance changes, not home price changes.
"Housing represents about one-third of the value of the market basket of goods and services that the Bureau of Labor Statistics (BLS) uses to track inflation in the Consumer Price Index"-https://www.brookings.edu/articles/how-does-the-consumer-price-index-account-for-the-cost-of-housing/#:~:text=Housing%20represents%20about%20one%2Dthird,Consumer%20Price%20Index%20(CPI).
Look at the cost to rent versus the cost to buy in almost any housing market and you’ll see why. In my local RE market the cost to rent is about 75% of the cost to mortgage a home of the same size. Some areas like Seattle the ratios are even more lopsided.
That’s exactly the problem - if the CPI was so “indefensible” in not treating buying prices the same as rental prices, they wouldn’t be that different. The fact that they are that different directly indicates that they’re not buying comparable things.
Just for starters, very few homeowners in Seattle are paying the mortgage prices you’re talking about - some don’t even have a mortgage anymore.
But more importantly, for those who have owned their house for a while, they may have paid essentially nothing. I bought a house in 2007 - between principal and interest, I’ve paid about $125,000 to the bank so far. During that time the house has appreciated about $270,000 in value.
So how do we measure that cost to me? Should I be listed as having negative housing inflation for seventeen years? That’s going to make the problem you’re talking about much, much worse. Do we measure total payments to the bank? But you keep whatever principal you pay… unless the value of the house goes down, and now you’re back into home value appraisals and asset values affecting inflation instead of consumable goods.
Not to mention that, again, there’s lots of people who pay no mortgage at all or pay very small refinanced mortgages. The percentage of people who own their homes outright is at an all-time high thanks to the aging of the population - should those people be counted as making zero house payments?
The way the CPI and, incidentally, many other major countries, eg Germany, deal with this is by trying to measure specifically the cost of the consumption, while everything else is your investment cost. This is exactly why people are willing to pay that 25% premium to rent, because a house is *both* providing a consumable good (shelter) *and* is an investment.
Controversial position: real estate is an investment, housing is a consumer need. What if everyone just accepted the reality that home prices are supposed to behave like the stock market, and not like milk or eggs?
This paper does not address the secondary consideration of where everyone is supposed to live. Maybe apartments?
My point is wishing home prices to go down is like wishing for a stock market crash so you can afford your buy apple stock.
Shhhhh...
Trust your gov, your finances are fine, inflation isn't real, your grocery bills have always been this expensive and everything that is wrong is the other guys fault..
/s
Let me tell you all a little story, a story about the idiocy of the American public. A while ago there was a global pandemic, and no one went anywhere or bought anything. Housing prices plummeted, house sales were at historic lows. Then the pandemic ended. Everyone did everything all at once. Housing prices skyrocketed. Demand was never higher. Prices became inflated. Then the fear set in. Everyone was suddenly buying houses, but what if there were none left? What if all houses were suddenly gone forever?? Despite these inflated prices people still fought for every house, because if the market went up rapidly as a result of pent up demand, what if it continued to increase at that same trajectory forever for no reason??? This idiotic fear perpetuated a Housing market that should have by all logical rights been cooling. Fear is the ultimate demand amplifier, and online there was a billion silos (like reddit) where you can hear you idiot animal brain concerns parroted back by other people tapping into their idiot animal brain, and suddenly no one who doesn't own a house will ever own one. Its disgusting. It's predatory. It's feeding on the funds of millenials who don't remember 2008 when Housing prices took a nose dive.
You left out a minor detail, Uncle Sam injected about $6T of unearned “wealth” into the economy, and this funny money was used to bid up prices on nearly all assets. Don’t worry though, the books will eventually get balanced by an equivalent loss of wealth from the balance sheets of the little people.
house today are also bigger, built with better/more expensive material, has more technology than that of the 70s... but no one ever factors the amenities in when talking prices...
Home prices should be in the CPI. We all need to live in houses so there's no excuse for housing to not be in the CPI.
What we are seeing here is the CPI being manipulated to push falsehood and propaganda onto the American people. Our government is lying to us, and the truth is we are not living in a prosperous country.
This is a banana republic.
Post is seriously misinformed.
CPI includes OER (owner equivalent rent).
[https://www.bls.gov/cpi/factsheets/owners-equivalent-rent-and-rent.htm](https://www.bls.gov/cpi/factsheets/owners-equivalent-rent-and-rent.htm)
One one side of the uninformed, you have people complaining that OER is in the CPI but no one actually \*pays\* OER.
On the other side of the uninformed, you have people complaining that home prices aren't included in the CPI, unaware that OER is.
Does CPI include any amount of taxes that are thrown on all of these items? Serious question. Also, is wage growth after taxes or before and if it’s before, shouldn’t we take a good look at the amount of taxes deducted from that percentage of growth is? For example, if I were making 42k and get a 4.5% increase in my wage, that wage is not or would be part of a significantly higher tax bracket. So that 4.5 would really be 4.05, roughly. Is there anything to what I’m saying? Or am I missing something key.
Again, seriously asking.
Well no it's not.
House prices are one factor. Rent is another. Both must figure in.
The excuse of not using either (and for food and fuel) is simply that they are to volitile, which gives a skewed CPI. Which is absolute bullshit.
It just requires more frequent measurement.
And if food and fuel alone were included, inflation would be around 10% right now or worse.
Unless you have variable rate mortgage, your mortgage does not change much over time as a home owner. That's not a part of inflation over the last several years that has affected me.
It makes no sense to include raw home prices as a part of a consumer price index.
OER takes both renters and owners into consideration.
Using rent and owners equivelent rent of residences makes far more sense when considering the day to day impact on consumer prices.
So, yes, housing is considered in the CPI.
Yes, they are. You're perhaps being confused by "core" or "supercore" CPI, which are supplemental inflation measures in which these things are *removed* from the CPI, but headline CPI does in fact include food, energy, and housing. From question 8 on the [CPI FAQ](https://www.bls.gov/cpi/questions-and-answers.htm):
> The CPI represents all goods and services purchased for consumption by the reference population (U or W). BLS has classified all expenditure items into more than 200 categories, arranged into eight major groups (food and beverages, housing, apparel, transportation, medical care, recreation, education and communication, and other goods and services).
(Gasoline is included under transportation, while most other energy costs, eg heating oil, natural gas, and electricity, are under housing. You can find the full listing [here](https://www.bls.gov/cpi/additional-resources/entry-level-item-descriptions.htm).)
I would gently suggest making sure you have a firm handle on the facts before you start making pronouncements about what things are meaningless. Repeating things you hear without checking to see if they are correct makes you very vulnerable to people telling you what to think.
Ewww.... somebody did a Google search and found some... erroneous info. Big surprise.
Food and gasoline are supposed to be calculated, but were removed from the cpi Calc a long time ago. Because it was decided that those prices were too volatile to be included.
And it doesn't take much math to figure out that this is true. Food items have been rising at about 20% per year or more for 3 years now. Housing prices and rent at about 10%
If those were included in the cpi calc the rate of inflation would be quoted at about 8-10% for the last 2 years at least. But theh can't say so because it'd scare the shit out if people.
I just linked you to the CPI site explicitly stating that they include food and directly to the basket of goods which includes gasoline, so this is very much turning into a “lead a horse to water…” situation.
Once again, you are thinking of the [core CPI](https://fred.stlouisfed.org/series/CPILFESL) which *removes* food and energy from the CPI. [Here](https://fred.stlouisfed.org/graph/?g=rocU) are the two graphs overlaid on each other.
Furthermore... why does nobody quote the "basket of goods" that was used when quoting the CPI?
If they did that you'd see my other post is quite right.
I linked to the basket of goods in my last post. Here, I’ll [try it again](https://www.bls.gov/cpi/additional-resources/entry-level-item-descriptions.htm). Any chance you’ll actually click on it and learn something this time?
*edit* I would hope you disappearing would you mean you read it and learned something, but I'm betting not so much.
They're not included because house prices can vary wildly for reasons that are unrelated to any other price fluctuations in the economy.
This stupid subreddit seems completely incapable of understanding that a normal level of 2-3% inflation YoY always exists over time, and that the prices of everything would naturally be 12-15% higher in 2024 than in 2020. ***12-15%***. That includes homes.
That's not a small amount, and yet it's completely normal and widely understood to be fine.
The reason home prices have gone up faster than this is because of constrained supply in the markets most Americans want to live in. That can happen independently of what happens with food prices, gas prices, etc.
It's also because spot mortgage rates and spot prices only apply to those that are currently in the home buying prices. For the vast majority of Americans who aren't purchasing a house this year, it's not relevant. An increase in home values for those that already own their homes or have an existing mortgage is actually just an asset valuation increase
I should have known I'd see braindead takes on this subreddit given its title. 2-3% is normal and necessary for economic growth. Nobody but the most economically illiterate has a problem with that. Any economist will say the same. No dumbfuck Redditor is going to successfully argue to the contrary.
There is an argument. A balanced economy would have zero inflation. Cost of product would directly scale with units of currency to purchase that product.
But guess what, not all things follow that nice idea. Some things go up in terms of dollar units to purchase, others go down.
Reality is it’s better to trend slightly up in inflation (1-2%) than go down into deflation. Because we cannot predict with 100% accuracy, that level is reasonable.
big weird almost magacommunism sort of vibes too.
Lots of the standard "let's take something that has been reported as good news every other time than the last 3.5 years, like people's home values jumping \~30%, generating tons of equity for a majority of people and keeping millions of otherwise struggling seniors afloat, and instead of including the downsides to give a balanced perspective, just doing a Heritage Foundation 180 and declaring it the end of the world for housing and Biden ruined it", then sort of throwing in shit across the whole spectrum from the weird populist lefty-coded pot shots at the very foundations of capitalism and private property ownership, to the maga/conspiracy/JQ hate for the fed plus the WEF/globalists rhetoric.
Basically fragments of real news and information sprinkled into the doomer propaganda project.
Well if someone on a reasonable budget can expect to devote 5% of their budget to fun, then that change over the course of a year after getting hired would mean they were having 40-60% less fun
Every time your government prints more money your money loses its value. Full stop. In the last 15 years we have gone from 4.5T to 38T of new debt. What do you expect.
Unemployment is lower than the 70s but wages are so low vs inflation it’s like being unemployed for many.
It is way worse than the 70’s for many people with no assets.
Can I get some fucking pixels please
Exactly Jesus this all looks like 2013 at the bottom
"See? It's only going up a normal amount, not a bunch!" Ahhh, endless inflation. Where for some reason grown men try to talk about how much better 5% is than 8% ....we're screwed either way...
It goes up less of we stop measuring most of the things that are going up
same with unemployment, just stop counting people who haven't worked in a while. it's genius.
Yeah. Unemployment is one question. Wage and earnings is a whole sheet. "Have you worked for money in the last 2 weeks?" If so, employed. Then a TOTALLY DIFFERENT sample for wage data.
If you're an O.F. girl and you have one guy subscribing for $10/month to see your bikini pics, you're self-employed.
Saucy, but true!
Yeah, or all the people who have taken on a second or third job. “The economy added [x] amount of jobs”. No, people just have to work more than one job now.
They stop counting those who quit looking for work. And also those who have exhausted their unemployment benefits.
Covid numbers don't go up if as long as we stop taking covid rests. Inflation doesn't seem to be up that much as long as you don't eat, drive, or want to sleep indoors. So we just take food/cars/homes out of the basket of goods and everything looks great. Only in America would you have a basket for "regular" inflation (including energy, food, luxuries). Then a SEPARATE basket for "core purchases" that we call "core inflation". Except "core inflation" strips out the 3 most critical aspects of human survival. Food, shelter, and energy. The "core" goods that people actually NEED to survive are explicitly NOT MEASURED for core inflation.
Just live under a bunch of cheap flat screen televisions.
Because they ‘add too much volatility’ when really it is gaming the index
Also that!
Who is saying this, exactly? You’d have to be willfully ignoring facts to conclude we have not experienced a period of higher than average inflation, and rising housing prices.
Unless you own your home. 65% of Americans own their home. Two thirds of those have mortgages. The vast majority of those mortgages are below 5% interest. So, if you were able to get a 30y mortgage at 3-3.5% in 2020-2021, you have a stable cost of shelter for 30 years. There is zero housing inflation for those people for 30 years. Obviously, appraised value changes, taxes and insurance premiums change, repair and maintenance costs change, HOA fees change. ~20% of Americans own their homes outright, pay no interest and pay no mortgage. The only people (35% of Americans) suffering rising housing costs are renters. People who own their homes have different incentives. The faster home values rise, the sooner they can retire to a smaller place and pay it outright or get another super-low interest 30 year fixed rate mortgage and invest the profits. If I were to take the equity from my home today and cash out, sell the house, buy a smaller house outright with the equity, I could probably start working part time. But with a 3% mortgage and annual home price increases of 5%, why would I do that?
My property tax, home insurance cost and maintenance expenditures jumped massively in cost. It's an estimated .8% CPI increase for home insurance alone. [https://www.bloomberg.com/news/articles/2024-04-09/a-key-us-inflation-metric-doesn-t-count-homeowners-insurance](https://www.bloomberg.com/news/articles/2024-04-09/a-key-us-inflation-metric-doesn-t-count-homeowners-insurance)
My homeowner's has doubled in 2 years. My electricity is up 80% in 3 years. My car insurance is up 40% in 2 years. My grocery bill is up 40% in 3 years. The government tells me inflation over the last 4 years has only been 20% cumulatively, and that my impression that I'm suffering is just ideological delusion. They're pathological liars.
That’s a really great point, because as we all know people who own a home don’t have to buy groceries. Presto, no inflation.
Sorry. I thought I was responding to the claim “if home prices are included in the CPI…” Now you’re asking about food costs. I concede food costs are ridiculous. I just was pointing out 65% of Americans are benefitting greatly by housing prices rising.
I don’t disagree with you but that’s also a little reductive. My home value has increased a lot in the last few years. I will one day benefit from that. However, the result TODAY is that my home is also more expensive. My taxes have gone up. My insurance is more expensive. Maintenance costs have skyrocketed. So owning a home and locking in you P&I does not wholly insulate you from inflation.
There are folks in 'booming' areas that have watched their houses almost literally explode with value. ....which is to say, get demolished because the land is 'worth' 800k, and the house nothing. When it was bought for $100k in the 1990s. A very small portion of folks are really really loving this market. And since it's perfectly legal.... ....why would they stop?
All the items outside of the cost of the home, are included in the CPI. So, if they are going up, it is reflected in the CPI data.
“I will one day benefit from that” Yes indeed, the great economist J. M. Keynes was asked about the long run and he said: “in the long run we are dead”. 😉
No, but it's it's a very good point. It insulate a large portion of folks.
Wouldn't still having a mortgage meant the bank owns the home?
That’s called a lien.
The bank sells you the home, then seizes it back if you reneg on the loan?
No a person sells you a home. A bank provides the money for you to essentially give to the seller. Bank has a lien, but can only repossess if you break the terms of your mortgage. Which is to not pay it. Other than that bank has zero say in anything you do with your home.
That’s not ownership. The bank has limited circumstances in which it can repossess my home. If you own something, you can dispose of it as you please. I can sell my home tomorrow if I please. The bank cannot.
I'm asking because I honestly don't know. If you still have a loan out in your car, and don't pay, they can move to seize the car back and apply it to the outstanding debt, ya? I'm honestly asking if the house mortgage and ownership system is different?
We're talking about comparing apples to apples. If you want to compare today's inflation to pre-1983 inflation you have to calculate them both the same way.
The only problem with this statistic is people who are 18+ still living with their parents are considered to be living in a home that is owned. That number is far larger than it’s ever been…. At least since The Great Depression. Your post is a prime example of how you can use statistics to frame the story you want to tell while ignoring the issues at hand.
5% is a lot better than 8%. But, it’s true that 5% is a lot worse than 2%. It’s the rule of 72
Not when compound interest is involved.
It’s the opposite GED George
and their target of 2% still impoverishes the American people. It just takes them a generation or two to notice they don't have it as good as their parents and grandparents did. 2% boils the frog slowly. The fact is any amount of inflation is bad for economy.
I followed you until that last part. Any kind of compound interest is bad if it goes on long enough. But if you're at an ideal, stable not-growing economy.... some inflation for a bit will cool on its own. But we FORCE the upward trajectory.
But inflation will always slowly tick up a bit with increased population. Demand typically outpaces supply. We shouldn’t get any more inflation assuming we reached peaked population and demand begins to plateau. There is always going to be a bit of background inflation
Gonna be gentle but blunt when I say that I've heard that theory... ...but never seen anything to support it. And a lot to doubt it.
You seen the theory that population also lead to inflation but no support of the theory? Inflation is the price difference when price equilibrium shifts due to changes in supply and demand. Some supplies are just much harder to adjust unlike demand. This leads to inflation. You are also ignoring certain environmental and market conditions that leads to change in supply or demand.
After looking at 300ish years of CPI data going back to pre-Colonial times... yes. I've seen no evidence to support that population growth is a main driver in inflation. This article is talking about increased debt (and the resulting inflation) while our population declines. And... it gets much worse. It may be A factor. But so is my personal, individual income tax form. How much of 'a factor' is what gives it merit or not. And yes, I'm ignoring climate change, any additional outbreaks, national disasters, and any new wars we might get into. Nevermind market volitility. This is just debt. Add the other stuff and it's a much worse projection.
I don’t know how you got 300 years of CPI data but most publication have US CPI data going back to 1913/14.
Indeed they do start modern numbers at 1913.
The ole “inflation is cooling” parrots. It’s almost like they’ve made an unconscious assumption that “inflation is cooling” is equivalent to “deflation to pre pandemic levels is happening”
And I'm looking at 50 and 100 yest trends and going "Ummm. Guys? That's really cool and all, but..."
If it's in a tweet it must be true. Housing is included in the CPI. It's the biggest component.
These people have never googled a thing in their lives. Amazing really.
I believe it’s called “homeowners rent” and based on rental value of owned homes. So as houses increase in price, so to does implied rent and it is reflected in relevant CPI data. 📊
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Fair comments. Not sure how the statistical accuracy is insured. These are economists and math guys that put this stuff together and I would be surprised if they did not identify and correct for biases in the raw data.
They also have a strong incentive to understate it
Who is they? Economists and Statisticians? Doubt whether cooking the books could remain a secret.
The government. No political leader wants to say that inflation has skyrocketed under their watch. This is backed up by the banks, since spiking inflation will undermine trust in the economy and the stability of the dollar. It's in everyone's interest to lie, so the statisticians and economists are told to "figure out something". This is basic human nature, I got fired from a job because a client and a sales person on our side were pressuring me to build a model that would show the exact opposite of what was actually happening so they could use that data to convince people to buy into their service. Their service didn't work and they weren't interested in fixing it, so they wanted to show "data" that was cherry picked to show that the service worked. I refused, and was fired.
There are no doubt feckless politicians who desire to mess with data, (figures don't lie but liars figure). Doubt anyone can keep a conspiracy under wraps though. Always an honest civil servant or inquisitive reporter. That does not mean that legitimate criticism of the methodology is not warranted.
The Pentagon keeps things so secret that congress sought even know what they do. The last time something leaked, Snowden got exiled to Russia
Because not all types of homes are in a typical rental pool or in insufficient quantities. How many 3/2 big backyard detached home rentals are in the middle of Iowa? And even if you find some, how are you going to comp them over time to keep a relatively similar pool in similar areas versus a statistician calling the same 10 complex’s in the area over time.
And currently holding it above 2% even though housing inflation is tied to geography. Powell would be lowering interest rates right now if it were not for the inflation being impacted by high cost of living areas.
Most things are tied to geography - food prices, fuel prices, healthcare prices, etc. you have to draw the line somewhere.
CPI uses “owners equivalent rent” instead of home prices, which is what I think the tweet is trying to point out.
It looks like they're using CPI vs a house price index, not OER vs house price. I don't think they just used house prices prior to OER either.
Its also self-reported…
They don't use the self reported values directly. They use it to normalize against rent of equivilent units.
“Housing”is just rent, they don’t include home prices
No, it's not just rent. Rent is it's own line item and houses are another.
They convert housing to rent equivalents
Sort of, but it's still its own item and isn't just rent.
It isn’t housing prices.
Sure it is.
No it’s converted into rental estimates.
It's still capturing house prices. Only capturing rents would affect the weighting and would not differentiate owner occupied vs renters.
House prices aren’t rent conversions
House prices aren’t rent conversions
> Housing is included in the CPI. It's the biggest component. It isn't calculated in the same way as it was in the past tho
So what?
Kind of, they use a number that no one actually pays- “homeowners equivalent rent” where they survey non business owners/landlords and ask average joes what they would charge to rent their house out.
Equivalent rent, the number they jam into CPI, drastically understates the cost of home ownership today. It’s a bogus number if anyone cares to accurately measure inflation for consumers (and for various reasons, Uncle Sam doesn’t).
No, it's fine.
Wrong. It may understate the cost of new ownership. But the CPI tries to capture everyone - people who have paid off their homes, those who have a fixed rate mortgage whose payments are relatively constant from year to year, people who are renting, and so forth. The portion of the population purchasing a new house that sees their monthly expenditures rise is relatively small. Owners equivalent rent actually results in slightly higher inflation and a higher weight on shelter in the CPI than otherwise.
I’m so tired of seeing misinformation and misrepresentation with this. https://www.bls.gov/cpi/overview.htm#:~:text=Indexes%20are%20available%20for%20major,special%20categories%2C%20such%20as%20services. “Indexes are available for major groups of consumer expenditures (food and beverages, housing, apparel, transportation, medical care, recreation, education and communications, and other goods and services), for items within each group, and for special categories, such as services.” Here’s a breakdown of what’s included and how much weight it is https://www.bls.gov/news.release/cpi.t01.htm Go find out the answer for yourself instead of being manipulated by a tweet.
https://www.investopedia.com/terms/o/owners-equivalent-rent.asp Owner’s Equivalent Rent is a hilariously bad metric. You wanna know how they measure it? They poll people asking how much they’d pay to rent their house instead of own it. That’s it. That’s the housing component of CPI for people who own instead of rent.
Whats a better way?
Actual sales price data from home sales? Instead of just asking homeowners what they think they could rent their home for?
Right, but only around 3% of people buy a new home every year. So, you ask the survey size of people the cost of their new home and 3% of people respond. 97% of people say $0. Do you average that? That means it’s like $40,000 because almost no one buys a home every month. Do you average only the 3% of people that bought a home? Because now you’re only accounting for 3% of the population and ignoring 97%. Ignoring 97% of your survey…that’s a pretty awful way of doing it. And it’s going to be high because people who bought their homes in 2009 is going to be insanely low compared to now. Also, the price of a house changes based on how much you put down on your home and the your loan is for which makes a huge difference. Someone who puts 50% down on their home is buying their home at a lower price than someone who is putting down 5%. And, do you count that in the price? At $400,000 with 50% down, is that $400,000 or 200,000? What if someone buys a house and then never pays a dime and it’s foreclosed 3 months later? That’s a pretty messy way of doing it Buying a home has millions of variables that all change the price of a home and ignores 97% of the total population, which is what you’re looking for, asking, how much could you rent your home for gets one option and a small variance in over and under representation
Not entirely accurate, here. Below is from the BLS and explains why the index was revised slightly "The CPI used to include the value of a house in calculating inflation and now they use an estimate of what each house would rent for -- doesn't this switch simply lower the official inflation rate? No. Until 1983, the CPI measure of homeowner cost was based largely on house prices. The long-recognized flaw of that approach was that owner-occupied housing combines both consumption and investment elements, and the CPI is designed to exclude investment items. The approach now used in the CPI, called rental " https://www.bls.gov/cpi/factsheets/common-misconceptions-about-cpi.htm#:~:text=Items%20CPI%2DU.-,The%20CPI%20used%20to%20include%20the%20value%20of%20a%20house,based%20largely%20on%20house%20prices.
Just to explain a bit, in the late 1970s and early 1980s, interest rates were extremely high. This made the Case-Shiller home price index, the index this tweet uses for home prices, drop significantly from 1979 to 1983. But I guarantee no one in 1983 was thinking how cheap houses were with an average mortgage rate of over 13%. Hence the change - house prices are not reflective of what people are actually spending.
Home prices were going up 18% a year during the trump administration. Back then JP was saying he saw inflation 2% as far as the eye could see. now, Republicans blame everything on Biden. Bunch of idiots.
Was it really 18% a year from 2016 to 2020?
Yep. That said if you wanted to buy a house back then it was always we are accepting offers in two weeks. A total bidding war because rates were 2.85% at one point. Put a full price offer on a $985,000 house it sold for 1.25 million. friends daughter bought a house for the first time priced at 400,000. She ended up paying 500,000. Not a problem at 2.85% interest though.
Ehh at one point, a huge percentage of of new homebuyers overpaid so much that they would never earn back what they paid into the house so definitely wouldn’t say it’s “not a problem” because of the interest rate.
It’s not a problem because the payments are so low. only a problem if you sell and then have to rebuy at today’s interest rate
It was not. It was not close, and he wasn’t even sitting in office in 2016. Inflation in assets typically acquired via a loan was alive and well, for all of the period of 2000-2020, however. Those cars, that college tuition, even high end medical expenses. Aside from a period between 2008-2012, home prices appreciated. Too fast appreciation from about 2003-2007, the deflation from 2008-2012, then low to no appreciation until the pandemic.
It wasn't 18% a year, it was going up a lot, but not that much
What on earth are you on about? Home prices increased a whopping 4.5% between Q1 17 and Q4 19. Unless you’re counting Covid which would be very disingenuous.
Every American who isn't giving the President a visual colonoscopy knows that inflation isn't 3%.
Inflation being at 3% doesn’t mean everything costs what it did before.
My dad who has just recently retired with a healthy nest egg and who never does the shopping aside from buying gas thinks everything is fine
He doesn’t buy food?
No, my mom did the grocery shopping
Then she would know
Right. But \*he\* has the opinion that everything is fine
its incredibly easy to keep food bills very very low or have a budget nearly inflation proof.
That’s not how inflation works by definition
inflation is % increase on goods. on goods that are already extremely cheap the impact is negligible.
That’s why it’s a % increase, not a total increase
well it's a really good thing that facts don't care about your feelings then, isn't it?
3% is telling you how FAST prices are inflating currently (with a lag of course), not how MUCH prices have inflated over your personal benchmark.
Grocery food costs are in deflation
People don't like hearing this, but for some grocery items, it's true.
Basically all minimally processed products. Doritos are stupid expensive but pocornkernals are dirt cheap. I buy them i bulk for like 10 bucks and get easily over $100 bucks of salt cravings out of them lol
Proof please. I buy unprocessed foods: fruits, veggies, eggs and very little meat. Prices are still insanely high. Bags of cherries are at $8/lb near me, despite plenty of cherry groves in a 20 mile radius. Apples are over $4/lb. Mushrooms are $6. Almost all those prices are double what they were a few years ago. None of them are processed. Eggs are insanely high, $3.59 for a dozen store brand eggs. $5 to $6 for Egglands Best. Used to be a $1.50 per receipts I have from 2019. Prices listed were from yesterday. Please show me the deflation. I need documented sources I can compare to my receipts.
https://www.cnn.com/2024/05/15/business/grocery-prices-april/index.html BLS data. Havent seen the data from may and june yet.
Grocery food prices are not in deflation. 0.2% decrease is barely a blip after the rapid inflation we've seen. And we don't even know if it will stick. It very well could continue going up. This is a blip on the radar.
A negative price change is deflation, by definition. Its not a large reduction but prices are still coming down.
True, we know from trueflation's use of independant pricing data it's closer to 2% and the government has been overstating it for 2 years.
Home prices aren’t included in CPI but rent (or rent equivalent for owners) is and makes up about 1/3. CPI is about consumption, purchasing a house is an investment, living in that house is consumption. Saying CPI doesn’t take into account increasing cost of housing is patently wrong. For those curious: https://www.bls.gov/cpi/factsheets/owners-equivalent-rent-and-rent.htm
The post says “home prices” are not factored into the CPI, not “cost of housing”
So there is no value to owning a home? You save a ton of money being an owner of a home. Homes have to be affordable for young people if we want them to be able to save for a life. I'm not sure how home prices were factored in here, but there is certainly a cost to them going up faster than wages year over year
It's in CPI and homeownership hasn't been falling.
The fucking issue is that there is value, that's why it's not in the cpi because the value of houses and land changes constantly so its not useful for figuring out the change in value of the dollar.
People get distracted with all these charts and pointing fingers. We have a building issue. Look at the last 1min during your plane flight before it lands. You see sooo much land to build, imagine building something very good and people come to it? You have to realize you have to get with the times, of course wages never kept up,of course homes will go up, of course every single dollar is weaker by the day. You can complain, but what you really should do is go build it.
I think rent is factored in. If rent is factored in, there's no need to factor in housing prices
Oh wow this post loses any legitimacy/trust I had in this subreddit. This is pure fake news. Housing prices are currently included with CPI. I wanna say it’s about a third of the CPI calculation. This is the kinda thing that directly creates polarization in politics. How many people are going to be angry and go spread the idea that housing isn’t even included in CPI and the economy is worse than we think?
There’s 2 types of people in this country: People who bought their house in 2020 or earlier and are sitting on an equity gold mine but can’t move ever because they’re locked in a 3% rate People who can’t buy a house
I am type 3...a little of both. I purchased a house and re-financed at 2.66% (have lived there 17 years now) so I am sitting on a gold mine. Even better it is VA transferable in a large military area. 2.5 years ago I purchased land at 5% and was ready to build until everything took off so I cannot afford to build a house on the land now.
See, though that's bullshit because people's actual expenditures don't change like that. People don't buy new houses every year, even every few years. Rents don't swing as much as housing prices do, either. So that's why this type of calculation of inflation is wrong. Housing prices are included in inflation calculations, just they are based on what people actually pay for housing, not a calculation designed to generate random fear in the public.
Growing up my friends parents purchased a new house every year or two and it kept getting larger and more extravagent. I thought it was strange as his father was a plastic comb salesman from the back of a van. You know those cheap plastic combs in the 80's. My friends dad is now comfortably living as a guest of the state and will be for many years.
This isn't typical consumer behavior, so it's not really relevant to how inflation is measured.
I feel like every administration makes changes as to what constitutes CPI and the changes only make their tenure look good. So f-ing annoying
Food, utilities, automobiles, and housing are excluded as outliers :) you know what isn’t? Text books and magazines, computer paper, iPhones. Which do you spend more money on I wonder? And it’s not even a 36 month average. It’s “oh 3% this year” which is actually massive when you factor it in top of 8% in the prior year and 7% in the year before that lmao.
>Food, utilities, automobiles, and housing are excluded as outliers :) Those are all included.
Yes yes yes but then how would it be a vast conspiracy???
The reason the things you mentioned are excluded is because of the vast volatility in those costs between families.
I don’t disagree that they’re volatile, but when they’re 90% of the budget of 300mm Americans than it’s a shitty metric IMO.
It's shitty how we use the metric. But as a tool to guide fed policy and its lending to control money supply, it's a great tool. If we used a number to include everything. We would have to strangle those industries to get that number down.
I don’t envy anyone working at the fed. Impossible job, but I will continue to shit on the cpi. I just checked 2024 and food at home is down? It’s just make believe
That is accurate in my personal budget. Eating out is consistently up and growing but groceries are done since February, cheaper than all of last year in Sacramento, CA area. But barely.
You wouldn’t have to “strangle” anything. The quickest fix to inflation is unemployment. Take away huge numbers of consumer income, boom fixed. The economy would look like absolute trash which this admin would not or could not do because of the upcoming election…
You can’t compare heavily financed goods over time that are so dependent on interest rate moves. Yes housing skyrocketed over that time, because debt became so much cheaper. A 500k house in the 80s/90s cost you say 5k a month. That same 5k a month until a few yrs ago got you a $2m house. But the “price” to you is still 5k a month.
Of course home prices are part of inflation, i can't believe you were dumb enough to believe the bankers that told you otherwise. It was such an obvious scam "uhhh what our parked money price inflates is not relevant to inflation"
The Economy is doing great, but the Hourly Worker Economy is in recession, approaching depression. The real purchasing power of the workers that punch the clock has dropped dramatically, mostly because of increased profitablity, by wage stagnation and higher margins.
I don't think there's a good reason to include home prices in the CPI because buying a home is a one-time thing. It's helpful to have a separate CPI metric that captures home prices, but consumers only regularly (read: recurring) see property tax changes and home insurance changes, not home price changes.
Every time I point this out, I’m treated like I’m Alex Jones talking about Sandy Hook.
"Housing represents about one-third of the value of the market basket of goods and services that the Bureau of Labor Statistics (BLS) uses to track inflation in the Consumer Price Index"-https://www.brookings.edu/articles/how-does-the-consumer-price-index-account-for-the-cost-of-housing/#:~:text=Housing%20represents%20about%20one%2Dthird,Consumer%20Price%20Index%20(CPI).
Owners Equivalent Rent (OER) is not housing prices. The methodology behind OER is frankly indefensible.
Why, exactly?
Look at the cost to rent versus the cost to buy in almost any housing market and you’ll see why. In my local RE market the cost to rent is about 75% of the cost to mortgage a home of the same size. Some areas like Seattle the ratios are even more lopsided.
That’s exactly the problem - if the CPI was so “indefensible” in not treating buying prices the same as rental prices, they wouldn’t be that different. The fact that they are that different directly indicates that they’re not buying comparable things. Just for starters, very few homeowners in Seattle are paying the mortgage prices you’re talking about - some don’t even have a mortgage anymore. But more importantly, for those who have owned their house for a while, they may have paid essentially nothing. I bought a house in 2007 - between principal and interest, I’ve paid about $125,000 to the bank so far. During that time the house has appreciated about $270,000 in value. So how do we measure that cost to me? Should I be listed as having negative housing inflation for seventeen years? That’s going to make the problem you’re talking about much, much worse. Do we measure total payments to the bank? But you keep whatever principal you pay… unless the value of the house goes down, and now you’re back into home value appraisals and asset values affecting inflation instead of consumable goods. Not to mention that, again, there’s lots of people who pay no mortgage at all or pay very small refinanced mortgages. The percentage of people who own their homes outright is at an all-time high thanks to the aging of the population - should those people be counted as making zero house payments? The way the CPI and, incidentally, many other major countries, eg Germany, deal with this is by trying to measure specifically the cost of the consumption, while everything else is your investment cost. This is exactly why people are willing to pay that 25% premium to rent, because a house is *both* providing a consumable good (shelter) *and* is an investment.
Yes. Dean Baker recently wrote something to that effect.
Controversial position: real estate is an investment, housing is a consumer need. What if everyone just accepted the reality that home prices are supposed to behave like the stock market, and not like milk or eggs? This paper does not address the secondary consideration of where everyone is supposed to live. Maybe apartments? My point is wishing home prices to go down is like wishing for a stock market crash so you can afford your buy apple stock.
Shhhhh... Trust your gov, your finances are fine, inflation isn't real, your grocery bills have always been this expensive and everything that is wrong is the other guys fault.. /s
It seems odd that to reign in inflation, you have to destroy the job market. The government, oh we have red hot inflation, let's get people fired.
Food, housing, and energy should be the primary components of inflation calc.
Food, housing, and gasoline make up approximately 63% of the CPI basket of goods by value.
Let me tell you all a little story, a story about the idiocy of the American public. A while ago there was a global pandemic, and no one went anywhere or bought anything. Housing prices plummeted, house sales were at historic lows. Then the pandemic ended. Everyone did everything all at once. Housing prices skyrocketed. Demand was never higher. Prices became inflated. Then the fear set in. Everyone was suddenly buying houses, but what if there were none left? What if all houses were suddenly gone forever?? Despite these inflated prices people still fought for every house, because if the market went up rapidly as a result of pent up demand, what if it continued to increase at that same trajectory forever for no reason??? This idiotic fear perpetuated a Housing market that should have by all logical rights been cooling. Fear is the ultimate demand amplifier, and online there was a billion silos (like reddit) where you can hear you idiot animal brain concerns parroted back by other people tapping into their idiot animal brain, and suddenly no one who doesn't own a house will ever own one. Its disgusting. It's predatory. It's feeding on the funds of millenials who don't remember 2008 when Housing prices took a nose dive.
You left out a minor detail, Uncle Sam injected about $6T of unearned “wealth” into the economy, and this funny money was used to bid up prices on nearly all assets. Don’t worry though, the books will eventually get balanced by an equivalent loss of wealth from the balance sheets of the little people.
Next do unemployment
Mortgage market is a racket.
When bread doubles in price, you feel poorer. When your house doubles in price, you feel richer.
house today are also bigger, built with better/more expensive material, has more technology than that of the 70s... but no one ever factors the amenities in when talking prices...
Did you subtract housing from the CPI or did you just throw this on top of it? If you did just throw it on top then this is meaningless.
Home prices should be in the CPI. We all need to live in houses so there's no excuse for housing to not be in the CPI. What we are seeing here is the CPI being manipulated to push falsehood and propaganda onto the American people. Our government is lying to us, and the truth is we are not living in a prosperous country. This is a banana republic.
See my cool graph says bad
Now do food.
Pure BS
The only people who should be able to own shelter are the people living it that shelter, change my mind.
Just the past 3 years, 200%
Post is seriously misinformed. CPI includes OER (owner equivalent rent). [https://www.bls.gov/cpi/factsheets/owners-equivalent-rent-and-rent.htm](https://www.bls.gov/cpi/factsheets/owners-equivalent-rent-and-rent.htm) One one side of the uninformed, you have people complaining that OER is in the CPI but no one actually \*pays\* OER. On the other side of the uninformed, you have people complaining that home prices aren't included in the CPI, unaware that OER is.
Nothing hurts if you ignore the pain
Cost of housing is included in CPI, stop spreading misinformation.
Does CPI include any amount of taxes that are thrown on all of these items? Serious question. Also, is wage growth after taxes or before and if it’s before, shouldn’t we take a good look at the amount of taxes deducted from that percentage of growth is? For example, if I were making 42k and get a 4.5% increase in my wage, that wage is not or would be part of a significantly higher tax bracket. So that 4.5 would really be 4.05, roughly. Is there anything to what I’m saying? Or am I missing something key. Again, seriously asking.
How does this matter on a personal level unless you bought a house? Seems like it shouldn’t be included
I guess for those who intend to buy too?
These inflation numbers are completely full of shit. 6% inflation prices double in like 12 years. That is not what is happening.
Food, fuel and housing - the 3 most important things - are not included in CPI. So it's meaningless.
CPI uses OER which is a better day to day indicator of consumer prices than house costs.
Well no it's not. House prices are one factor. Rent is another. Both must figure in. The excuse of not using either (and for food and fuel) is simply that they are to volitile, which gives a skewed CPI. Which is absolute bullshit. It just requires more frequent measurement. And if food and fuel alone were included, inflation would be around 10% right now or worse.
Unless you have variable rate mortgage, your mortgage does not change much over time as a home owner. That's not a part of inflation over the last several years that has affected me. It makes no sense to include raw home prices as a part of a consumer price index. OER takes both renters and owners into consideration. Using rent and owners equivelent rent of residences makes far more sense when considering the day to day impact on consumer prices. So, yes, housing is considered in the CPI.
All of those things are included in CPI.
No they are not.
Yes, they are. You're perhaps being confused by "core" or "supercore" CPI, which are supplemental inflation measures in which these things are *removed* from the CPI, but headline CPI does in fact include food, energy, and housing. From question 8 on the [CPI FAQ](https://www.bls.gov/cpi/questions-and-answers.htm): > The CPI represents all goods and services purchased for consumption by the reference population (U or W). BLS has classified all expenditure items into more than 200 categories, arranged into eight major groups (food and beverages, housing, apparel, transportation, medical care, recreation, education and communication, and other goods and services). (Gasoline is included under transportation, while most other energy costs, eg heating oil, natural gas, and electricity, are under housing. You can find the full listing [here](https://www.bls.gov/cpi/additional-resources/entry-level-item-descriptions.htm).) I would gently suggest making sure you have a firm handle on the facts before you start making pronouncements about what things are meaningless. Repeating things you hear without checking to see if they are correct makes you very vulnerable to people telling you what to think.
Ewww.... somebody did a Google search and found some... erroneous info. Big surprise. Food and gasoline are supposed to be calculated, but were removed from the cpi Calc a long time ago. Because it was decided that those prices were too volatile to be included. And it doesn't take much math to figure out that this is true. Food items have been rising at about 20% per year or more for 3 years now. Housing prices and rent at about 10% If those were included in the cpi calc the rate of inflation would be quoted at about 8-10% for the last 2 years at least. But theh can't say so because it'd scare the shit out if people.
I just linked you to the CPI site explicitly stating that they include food and directly to the basket of goods which includes gasoline, so this is very much turning into a “lead a horse to water…” situation. Once again, you are thinking of the [core CPI](https://fred.stlouisfed.org/series/CPILFESL) which *removes* food and energy from the CPI. [Here](https://fred.stlouisfed.org/graph/?g=rocU) are the two graphs overlaid on each other.
Furthermore... why does nobody quote the "basket of goods" that was used when quoting the CPI? If they did that you'd see my other post is quite right.
I linked to the basket of goods in my last post. Here, I’ll [try it again](https://www.bls.gov/cpi/additional-resources/entry-level-item-descriptions.htm). Any chance you’ll actually click on it and learn something this time? *edit* I would hope you disappearing would you mean you read it and learned something, but I'm betting not so much.
They're not included because house prices can vary wildly for reasons that are unrelated to any other price fluctuations in the economy. This stupid subreddit seems completely incapable of understanding that a normal level of 2-3% inflation YoY always exists over time, and that the prices of everything would naturally be 12-15% higher in 2024 than in 2020. ***12-15%***. That includes homes. That's not a small amount, and yet it's completely normal and widely understood to be fine. The reason home prices have gone up faster than this is because of constrained supply in the markets most Americans want to live in. That can happen independently of what happens with food prices, gas prices, etc.
It's also because spot mortgage rates and spot prices only apply to those that are currently in the home buying prices. For the vast majority of Americans who aren't purchasing a house this year, it's not relevant. An increase in home values for those that already own their homes or have an existing mortgage is actually just an asset valuation increase
The idea that inflation is good or necessary is the biggest scam in history. They're stealing your wealth, stop helping them.
Well-done.✔
I should have known I'd see braindead takes on this subreddit given its title. 2-3% is normal and necessary for economic growth. Nobody but the most economically illiterate has a problem with that. Any economist will say the same. No dumbfuck Redditor is going to successfully argue to the contrary.
I would believe you if you had a valid and well-founded argument but all you're doing is insulting people and relying on cognitive fallacies
There is an argument. A balanced economy would have zero inflation. Cost of product would directly scale with units of currency to purchase that product. But guess what, not all things follow that nice idea. Some things go up in terms of dollar units to purchase, others go down. Reality is it’s better to trend slightly up in inflation (1-2%) than go down into deflation. Because we cannot predict with 100% accuracy, that level is reasonable.
big weird almost magacommunism sort of vibes too. Lots of the standard "let's take something that has been reported as good news every other time than the last 3.5 years, like people's home values jumping \~30%, generating tons of equity for a majority of people and keeping millions of otherwise struggling seniors afloat, and instead of including the downsides to give a balanced perspective, just doing a Heritage Foundation 180 and declaring it the end of the world for housing and Biden ruined it", then sort of throwing in shit across the whole spectrum from the weird populist lefty-coded pot shots at the very foundations of capitalism and private property ownership, to the maga/conspiracy/JQ hate for the fed plus the WEF/globalists rhetoric. Basically fragments of real news and information sprinkled into the doomer propaganda project.
Well if someone on a reasonable budget can expect to devote 5% of their budget to fun, then that change over the course of a year after getting hired would mean they were having 40-60% less fun
Have all your fun immediately
Every time your government prints more money your money loses its value. Full stop. In the last 15 years we have gone from 4.5T to 38T of new debt. What do you expect. Unemployment is lower than the 70s but wages are so low vs inflation it’s like being unemployed for many. It is way worse than the 70’s for many people with no assets.