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Why do you say that? I own a house and it’s my favorite place to be.
Why the government took home prices out of its main inflation index
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Re: Why the government took home prices out of its main inflation index
#62Earlier quoted context omitted.
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…
Back when it was normal to buy a house and support a family on a single income? Nearly impossible now. Sounds like there are some serious flaws with that index.
Also while I can’t find internet sources, from talking to old people I get the impression most Americans had 15 year mortgages back the.
Re: Why the government took home prices out of its main inflation index
#63https://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 people in charge have houses and want house prices to go up. That's the beginning, middle, and end of the thinking.
The Realtor and homebuilder lobbies are part of the thinking, too.
Re: Why the government took home prices out of its main inflation index
#64https://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…
https://www.cdc.gov/nchs/data/nvsr/nvsr70/nvsr70-17.pdf
Number of births have been dropping since 2008ish, from this graph by the CDC.
Year 2022 - year 2008 = 14
Does that means starting this year, high school enrollment will be dropping year over year? In 4 years time, college enrollment will be dropping year over year. In 8 years time, labor enrollment will be dropping year over year.
As for housing, there was a baby bump around 2008, that helps explain the housing boom for the last number of years. New parents scramble for housing in 2008, then a larger home (after the child hits 6 years old?) around 2014 . But as those kids are now starting high school, and families have settled in for the next 4 years, does this imply a housing slump?
Re: Why the government took home prices out of its main inflation index
#65Earlier quoted context omitted.
The people in charge have houses and want house prices to go up. That's the beginning, middle, and end of the thinking.
To which you add, people that buy houses want to be able to sell making a large benefit. So you profit from using it (by living in it or renting it) and sell it for more than you did put into it...
Do they plan to live in a tent after they 'used' the house and sold it? Because if they plan to buy a new house to replace the one they sold, they haven't made any money. And if they want to upgrade, they lost money and the price difference will have increased.
The only case where you benefit from rising hoise prices is if all of your income comes from owning property, rather than working a job - i.e. you are a major landowner.
If you are doing anything economically productive, from running a business to working a job, houae prices are a blood-sucking vampire squid.
Re: Why the government took home prices out of its main inflation index
#66https://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 transp…
Housing prices are affected by monetary and psychological aspects just like the stock market and inflation are.
If people stop believing housing is a good investment then prices will fall.
Re: Why the government took home prices out of its main inflation index
#67For 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.
I think the “new” (now 39 years old) method is superior overall, but I think it’s entirely factually correct that they took home prices out of the index. They did not take housing expenses out, which is what many people whose sole exposure to economics is via memes seem to think/be encouraged to think.
I think the methodological flaw here is the assumption that nominal housing prices are elastic. Housing expenses fell over the last ~30 years as interest rates fell, however it's highly unlikely that the reverse will hold true to the same tune. If interest rates go to 10%, people will stop trading housing rather than take a nominal hit and be under water on a mortgage.
This means that as interest rates rise, housing expenses may spike - forcing employees to demand more money. Given the size of the housing budget in many households, this effect could be surprisingly strong.
Re: Why the government took home prices out of its main inflation index
#68https://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…
This was all part of the plan to build a nation of mindless debt slaves. It was very effective.
Re: Why the government took home prices out of its main inflation index
#69In a nutshell:
> The price of the home has risen by 20 percent, so you could just say the cost of housing has gone up 20 percent. But that would be misleading. Assuming a 20 percent down payment, your original mortgage would have cost $2,502 per month, while the new owner’s mortgage would cost $2,489 per month. The monthly mortgage payment required to own the home actually went down.
Falling interest rates have kept houses affordable at inflated prices. Because most housing is purchased with debt, the change reflects the reality that most owners are paying off a mortgage. The change made by government prevents interest rate fluctuations from interfering with the CPI calculation.
Over time, the change resulted in less volatility of the CPI, but no major changes when viewed from a multi-year perspective.
Re: Why the government took home prices out of its main inflation index
#70https://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.
Millions of people have started families in slavery too. And during the plague.
What wisdom does this argument lead us to - basic hygene and human right are superfluous?