Earlier quoted context omitted.
I don't think that's entirely fair. When I bought my house 6 years ago I looked at the monthly payment and compared it to rent in the area. For my mortgage (and a small down payment) at the time I could rent something like a fairly run down three bedroom apartment or I could own a run down three bedroom house. If you can live somewhere for free you can think about it in those terms (and I think about smaller purchase…
My monthly mortgage payment on a nearly 4,000 sq foot home on nearly an acre is about the same as local monthly rental of a 2 bedroom apartment. I can't decide if I got a deal or if local rental prices are crazy high.
Why the government took home prices out of its main inflation index
111–120 of 344 posts
Re: Why the government took home prices out of its main inflation index
#112I still argue for that central banks got inflation wrong. Central banks set inflation target to to percent to try and control wage inflation. But wage inflation are globalized. So I argue that central banks tried to control local wage increase on a globalized market which is impossible. Central banks cannot control price increases on global market. Also central banks did not take into account increased housing prices…
This is simply false. What a central bank can affect, in the long run, is the average level of prices(including wages) denominated in the currency they control, even globally. Inflation in the price level of other currencies, on the other hand, is mostly irrelevant to a particular central bank.
It is true that central banks cannot control a relative change in prices of energy or any other single good, but that isn't even their goal.
Re: Why the government took home prices out of its main inflation index
#113Earlier quoted context omitted.
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…
Also, older people think more about downsizing than about upsizing their homes.
Re: Why the government took home prices out of its main inflation index
#114The complexity is this: > Suppose you buy a home for $500,000, financing the purchase with a mortgage at a 6.4 percent interest rate. A few years later, you sell for $600,000. Interest rates have fallen, and the new buyer is able to get a mortgage at 4.7 percent. > 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…
But someone made $100k in a sale a few years later…
Re: Why the government took home prices out of its main inflation index
#115Earlier quoted context omitted.
No it hasn't. The numbers on that site are fiction.
They look like adding a constant to the official numbers, lol. There is plenty of genuine spirited debate to be had over the basket of goods. There is room for using one indicator over another for any given application. Even against that backdrop shadowstats is clearly just a grift.
Absolutely, but this kind of debate needs to be done in good faith and with the understanding that whatever new basket of goods one comes up with is unlikely to be applicable to any more people in the economy.
The basket of goods is like a a medium shirt. It's not going to fit anyone very well, and it won't fit most people at all. Swapping the shirt out for a large isn't going to improve the fit for people as a whole, it will just change the people who fit in it.
The curse of dimensionality rears its head when talking about "averages" over a number of dimensions. There's not really a good methodology to distill such a complex topic down to a single figure.
Re: Why the government took home prices out of its main inflation index
#116https://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 ba…
Many older folks are retiring in fields where they might have worked part time for extra money or for that thing that they don't think is worth it anymore following COVID. I've heard it called the "silver tsunami." The "boomers" are all retiring with only those without retirement savings or without generous relatives to fall back working for health insurance or for a little money to pay for food.
The number of flight incidents with rude, disruptive, or violent flyers has reached records levels. Working a grocery store over the past few years supposedly part time but always overtime lately, I have noticed more entitled, rude, desperate, and stressed out customers more generally. It's not just about masks either. I was threatened two years ago because we didn't have soy baby formula in stock for example, as if there were some being hidden in back stock.
In accounting where I work now, we had the senior associates and middle management all quit in a short timespan for other firms. 3/4 of CPAs are eligible for retirement. Your fortune 500 company audits are now being handled by people collectively with way less experience than they used to. Standard operating procedure seems to SALY ("Same As Last Year") in audit the past couple of years or blame discrepancies on COVID. So much fraud has likely happened that will probably never come to light.
Nurses and doctors are all facing mental health crises. Violence against medical professionals is rising at rapid rates even prior to the pandemic. Many health professionals don't report assaults either because of their altruistic tendencies. More than half of nurses are thinking or planning on quitting their jobs. More than half of all doctors wouldn't recommend or don't want their children to go into medicine. Here's a fun little excercise for you. Google the nearest hospital near you and see how many openings they have. Especially for security. The hospital near me has never had a security officer. Now they have five. Hospital workers are being taught de-escalation techniques and taking self defense classes. Senior homes are facing record shortages of labor.
I suppose this is a very brief and calm overview of what's going on. I hope that programmers appreciate how much pay and how little stress you receive in comparison to many other industries. Expect to take care of more relatives, pay more to eat out, and healthcare shortages near you soon. Filipino nurses and teachers are being trained and brought in to fill positions filled briefly by the national guard. Our country is in crisis, and most of us just don't know it yet. I'm not even getting into the healthcare issues in Britain, Canada, and Australia as well.
Re: Why the government took home prices out of its main inflation index
#117https://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…
In areas where developable land is very plentiful - rural, deserts, minimal environmental/nimby protections, etc. - land prices will remain low and house prices should be constrained by building costs. In the same way that we don't expect TV or car prices to go up very much with lower interest rates, even though you consume durable goods over 20years, as competition holds the prices to what it costs to make rather than how you benefit from them. Over the long term, it used to be that house prices tracked construction costs pretty well.
However in areas where the fixed quantity of land is binding - urban, or areas with stringent protections and managed growth policies - land and house prices will be bid up to what people can afford via monthly payments, and will therefore respond greatly to interest rates (and IR expectations)
Further add on that high property taxes in some regions can dilute the costs associated with financing changes (if interest rates increase from 1 to 2%, but you're paying 5% in property taxes, that's only a 7/6% increase in your costs)
edit: to summarize, where supply is elastic, interest rate reductions should cause quantity supplied to increase, price to remain the same, and monthly costs to decrease. Where supply is inelastic, the quantity stays the same, monthly payments stay the same, price increase. We've possibly moved into an environment with more supply inelasticity in recent history.
Re: Why the government took home prices out of its main inflation index
#118Earlier quoted context omitted.
I was pleasantly surprised that Rocket Mortgage (Formerly Quicken Loan) actually has a calculator on the dashboard when I view my loan information that shows me how much interest I'll pay over the lifetime of the loan. I can even change my monthly payments and see how it will effect the lifetime interest of my loan and how much faster I will pay it off.
Under federal law, when you get your credit card bill, the bank is required to include a breakdown of, for example, how long you have to pay if you only make the minimum payment, and how much your total payments will be if you only make the minimum payment. We need something similar and conspicuous for mortgages. Let people really see/feel the interest. Another way I’ve seen it phrased is in terms of buying power, an…
People who can't (or don't want to) math aren't likely to suddenly do so because of an additional disclosure.
Re: Why the government took home prices out of its main inflation index
#119Mortgage loan officers (and also car salesmen) do all in their power to redirect people away from the fact that they're going to fork over e.g. $600k in total interest and principle for a $300k sticker-price house over 30 years. They do this by focusing on the monthly payment rather than the actual total spend. Convincing buyers that monthly out-of-pocket spend is somehow a proxy for the actual purchase price is a po…
I blame consumers for falling into the trap. I’m not saying the sellers don’t have a lot of responsibility here as well, but consumers need to be smarter. It’s a pretty obvious play. I go into a dealership, and the first question the salesman asked me is “what do you want your monthly payment to look like.“ And I always respond with something (a little snarky) like “ I don’t care what my monthly payment looks like, I…
Re: Why the government took home prices out of its main inflation index
#120Earlier quoted context omitted.
Starlink is a real gamechanger. My dad's house in Maine a little ways from a small city had 1Mbps "broadband." Houses further down the road had nothing wired and all the Plan Bs (conventional satellite/hotspot) were lousy options. While Starlink isn't 100% reliable I could actually work from there if I wanted to.
Could you? I have been remote for about 4 years and I have difficulty doing my job if my internet goes out for even an hour during my working time. I also have issues doing my job if I can’t stream audio/video due to speed issues- and this happens even with a hardwired connection on occasion.
Yes? My internet from Comcast is pretty good but it's not flawless. Power is even better but can go out. And I have very marginal cell reception without WiFi assist. That's 40 miles outside of major Northeast city. I'm frequently on calls where someone or other has network issues and can't present or need to drop. Life goes on. If my Internet goes out for an hour or two I find something to do that doesn't require Internet.