Why the government took home prices out of its main inflation index • Hacker News Board

Re: Why the government took home prices out of its main inflation index

#31

Post by Robotbeat » Fri, May 27, 2022, 1:41 PM UTC

kasey_junk wrote: post #25

recursivedoubts wrote: post #20

https://www.longtermtrends.net/home-price-median-annual-inco... nb that there is little relation to interest rates, which have been steadily declining since 82: https://www.freddiemac.com/pmms with the recent spike, we are currently at ~2000 interest rates, when homes were at 4x incomes, rather than 7+x home prices have been absolutely bonkers, with two massive bubbles (we are in one right now) and the fact that this…

The Case Shiller index shows affordability was similar in the early 50s to now, that was the heart of the baby boom so I think we can predict that won’t be the reason people don’t start families. The article actually mentions that on an inflation adjusted basis the monthly mortgage was the same now as in the early 80s (due to interest rate differences). It’s basically not true that housing costs are categorically dif…

Home affordability is same now only because now you have two incomes, and no one to raise the kids.

Re: Why the government took home prices out of its main inflation index

#32

Post by dragonwriter » Fri, May 27, 2022, 1:42 PM UTC

recursivedoubts wrote: post #20

https://www.longtermtrends.net/home-price-median-annual-inco... nb that there is little relation to interest rates, which have been steadily declining since 82: https://www.freddiemac.com/pmms with the recent spike, we are currently at ~2000 interest rates, when homes were at 4x incomes, rather than 7+x home prices have been absolutely bonkers, with two massive bubbles (we are in one right now) and the fact that this…

> the really psychotic aspect of this all is that in the long run it will destroy the economy as family formation craters

Starting a family doesn't require owning a home. Vast numbers of people start families without ever owning a home.

Re: Why the government took home prices out of its main inflation index

#33

Post by recursivedoubts » Fri, May 27, 2022, 1:42 PM UTC

nradov wrote: post #28

recursivedoubts wrote: post #20

https://www.longtermtrends.net/home-price-median-annual-inco... nb that there is little relation to interest rates, which have been steadily declining since 82: https://www.freddiemac.com/pmms with the recent spike, we are currently at ~2000 interest rates, when homes were at 4x incomes, rather than 7+x home prices have been absolutely bonkers, with two massive bubbles (we are in one right now) and the fact that this…

The CPI includes rent (and owner's imputed rent). No one needs to purchase real estate. That's an investment, not a living expense. Millions of people have started families in rented homes.

"you'll own nothing and you'll like it"

Re: Why the government took home prices out of its main inflation index

#34

Post by KptMarchewa » Fri, May 27, 2022, 1:45 PM UTC

glowingly wrote: post #5

alephnan wrote: post #2

Quoted post unavailable.

While I do like the latter, a house is a fairly rare purchase in one's life. Admittedly, a very major, rare purchase. But typically a rare one nonetheless. My weekly grocery runs are more indicative of CPI to me.

Rare one, but mortgage payments can impact your life even some decades later.

Re: Why the government took home prices out of its main inflation index

#35

Post by mschuster91 » Fri, May 27, 2022, 1:45 PM UTC

recursivedoubts wrote: post #20

https://www.longtermtrends.net/home-price-median-annual-inco... nb that there is little relation to interest rates, which have been steadily declining since 82: https://www.freddiemac.com/pmms with the recent spike, we are currently at ~2000 interest rates, when homes were at 4x incomes, rather than 7+x home prices have been absolutely bonkers, with two massive bubbles (we are in one right now) and the fact that this…

> home prices have been absolutely bonkers, with two massive bubbles (we are in one right now)

Isn't the definition of a bubble that it has the capability to pop and then eventually pops? At least for urban housing, I see no way of that even being remotely possible, neither for the US nor here in Europe. Rural areas simply are too far left behind to support decent human life - no high speed Internet, no public transport, no necessary infrastructure like doctors/pharmacies/grocery stores, no employment opportunities, schools closing down everywhere and that's just the short list of issues.

As a consequence, the rural flight can and will only accelerate - I see no way ever for politicians to approve the absurd amount of expenses for bringing rural areas back to speed, not with the aftermath of covid and the current Russian invasion having strained anyone's budgets to the limit.

Re: Why the government took home prices out of its main inflation index

#36

Post by shepardrtc » Fri, May 27, 2022, 1:48 PM UTC

kasey_junk wrote: post #25

recursivedoubts wrote: post #20

https://www.longtermtrends.net/home-price-median-annual-inco... nb that there is little relation to interest rates, which have been steadily declining since 82: https://www.freddiemac.com/pmms with the recent spike, we are currently at ~2000 interest rates, when homes were at 4x incomes, rather than 7+x home prices have been absolutely bonkers, with two massive bubbles (we are in one right now) and the fact that this…

The Case Shiller index shows affordability was similar in the early 50s to now, that was the heart of the baby boom so I think we can predict that won’t be the reason people don’t start families. The article actually mentions that on an inflation adjusted basis the monthly mortgage was the same now as in the early 80s (due to interest rate differences). It’s basically not true that housing costs are categorically dif…

> It’s basically not true that housing costs are categorically different than any other time.

Are you a realtor?

Re: Why the government took home prices out of its main inflation index

#37

Post by [deleted] » Fri, May 27, 2022, 1:49 PM UTC

gilbetron wrote: post #4

For those that only read the headline, the article is much more interesting. There's a paper that recreated what the inflation rate would have been with the old method, and it tracks the new method closely, but just has more volatility. Plus, "the government" didn't take home prices out, they just switched to a different approach to tracking them.

[deleted]

Re: Why the government took home prices out of its main inflation index

#38

Post by sokoloff » Fri, May 27, 2022, 1:49 PM UTC

hnthrowaway0315 wrote: post #12

I think one should have one's own inflation index. Basically I'd layout the expenses (food, utility, mortgage, child day care, etc.) and go from there. Some expenses inflates every year (food/utility), some are fixed for 5 years and then maybe jump up/down (mortgage, depending if Fed is cutting or hiking rates).

That sounds like a budget, which is indeed a good thing to have but answers very different questions from a broad-based inflation calculation.

Re: Why the government took home prices out of its main inflation index

#39

Post by dragonwriter » Fri, May 27, 2022, 1:50 PM UTC

dopylitty wrote: post #21

thawaya3113 wrote: post #18

The big problem is people believing that there is any one such thing as inflation. There isn’t. The word inflation represents many, including wildly divergent, ideas. And many of the very different things represented by inflation serve very different purposes, and that’s why they’re changed, because different measures of inflation help measure different concepts. Core inflation is just one of many different measures…

This is a good point. The government really shouldn’t be producing a single number and saying that’s “the” inflation rate. It muddies the waters and makes it easy to think that the economy is some magic system where things just happen rather than the sum of choices by individual companies and consumers. If OPEC decided to stop producing oil altogether you bet there would be “inflation” caused by oil prices but that d…

> The government really shouldn’t be producing a single number and saying that’s “the” inflation rate.

It doesn't, it produces many different Consumer Price Indices, plus a variety of industry-specific Producer Price Indices, all are measures of inflation.

Re: Why the government took home prices out of its main inflation index

#40

Post by sokoloff » Fri, May 27, 2022, 1:51 PM UTC

nradov wrote: post #24

dopylitty wrote: post #21

Earlier quoted context omitted.

This is a good point. The government really shouldn’t be producing a single number and saying that’s “the” inflation rate. It muddies the waters and makes it easy to think that the economy is some magic system where things just happen rather than the sum of choices by individual companies and consumers. If OPEC decided to stop producing oil altogether you bet there would be “inflation” caused by oil prices but that d…

The government doesn't produce a single number. The BLS produces multiple numbers and you can use whichever one fits your situation best.

Same story with unemployment. Lots of people complain that U-3 doesn't capture some aspect of unemployment that they care about. Okay; that's why there are 5 other U-x measures...