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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

#191

Post by rnk »

dont__panic wrote: post #168
zie wrote: post #159

Earlier quoted context omitted.

> The government lets you deduct your mortgage interest from taxes This is effectively not true anymore. > Also, what am I going to do instead, rent? My rent can go up $50 bucks a year where my mortgage payment is locked in. For most people, home ownership is the safest and best way to build a retirement nest egg and a tangible asset to borrow against in times of trouble. I'm going to push back a touch on this, it's…

>> The government lets you deduct your mortgage interest from taxes > > This is effectively not true anymore. Care to explain? Is this because the standard deduction is so high, it's generally not worth itemizing for most people since the Trump tax system adjustment? Genuinely curious; I'm a current renter, hopefully purchasing in the next couple of years. But this is an important part of the buying calculus.

They are probably referring to the $10k salt limit this is the total deductible state and local tax and interest deduction. In any big city your property taxes are probably 5k+, add state taxes, you don't have any room under the 10k limit to deduct mortgage interest. That deliberate Republican property tax screw you change made a big difference (the old deduction was also a huge tax deduction for huger middle class to wealthy people).

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

#192

Post by isubkhankulov »

JohnJamesRambo wrote: post #80
djoldman wrote: post #75

The 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…

Do you have to subtract the mortgage interest expenses from $100k to get closer to their true net profit?

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

#193

Post by BlargMcLarg »

bombcar wrote: post #170
leoedin wrote: post #44

Earlier quoted context omitted.

The point isn't that you can't start a family without owning a home (obviously that's untrue) but that many people won't want to start a family while living in the relative instability of rented accommodation. That's almost certainly true - I definitely had buying a home as a pre-requisite to starting a family (and I don't regret that decision). There's always going to be some babies, but it's the societal level fert…

> The point isn't that you can't start a family without owning a home (obviously that's untrue) but that many people won't want to start a family while living in the relative instability of rented accommodation. The amusing part of it is that small children are the most amenable to moving, it's not until they're a bit older and getting into school that moving becomes a real problem for them. Fertility rates are low e…

Most developed countries took a significant hit to fertility rates around 1970-1980 and stayed below replacement rate since then, fluctuating or dropping further down but never recovering well above replacement rate. I can think of a few things happening during those years, but "housing" wouldn't be a global one.

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

#194

Post by lordnacho »

FooBarBizBazz wrote: post #135
faangiq wrote: post #68

Earlier quoted context omitted.

This was all part of the plan to build a nation of mindless debt slaves. It was very effective.

It's actually true, in a way. There was a worry after WW2 that a large number of young, single men, trained in combat and now returning home, would destabilize American politics, especially if they could not be absorbed by the labor market. One response was the GI bill, so that some could go back to school. That would help to slow their return to the job market, and hopefully prevent unemployment. Another was the 30-…

The young men -> instability theory is one I've heard several times. It makes sense, but is there evidence or some sort of seminal article about it?

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

#195

Post by josefresco »

jjoonathan wrote: post #26
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 people in charge have houses and want house prices to go up. That's the beginning, middle, and end of the thinking.

I live in a popular vacation destination. The locals didn't panic when wealthy multiple-home owners started buying up houses because ... their property values were increasing! Now local business can't find workers, towns can't find employees all because housing is out of reach for the working and lower-middle class. Like boiling a frog, most people won't care until it's too late.

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

#196

Post by lupire »

marcosdumay wrote: post #113
ClumsyPilot wrote: post #65

Earlier quoted context omitted.

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…

People that had money 3 or 4 decades ago tend to own a few houses and get some income from renting. Also, older people think more about downsizing than about upsizing their homes.

Do they also hate their children?

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

#197

Post by sokoloff »

chii wrote: post #95
sokoloff wrote: post #38

Earlier quoted context omitted.

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

if they normalized the budget such that extra things not purchased in previous years is not taken into account, it could be used as a personal inflation measure. Normalizing the budget means you remove any life-style creep that gets in. This way, you can look at your salary, and determine whether you're gaining income above your own inflation, or not.

Normalizing the budget that way would seem to be incredibly difficult at a personal level.

If I started buying a better cut of steak or more hamburger and less ramen than last year, would I really be able to tease out that difference without an insane amount of record keeping/data entry?

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

#198

Post by 908B64B197 »

josefresco wrote: post #195
jjoonathan wrote: post #26

Earlier 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.

I live in a popular vacation destination. The locals didn't panic when wealthy multiple-home owners started buying up houses because ... their property values were increasing! Now local business can't find workers, towns can't find employees all because housing is out of reach for the working and lower-middle class. Like boiling a frog, most people won't care until it's too late.

> towns can't find employees all because housing is out of reach for the working and lower-middle class.

Why not simply increase the supply?

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

#199

Post by jimmydorry »

dont__panic wrote: post #160
thatfrenchguy wrote: post #103

Earlier quoted context omitted.

> next to no appeal to me That’s sort of the point. I’d kill myself before I’d live in a small town again instead of San Francisco. I can walk to 10 grocery stores, 20 restaurants, literally find all the food I want, and the public transit is pretty good. Who wants to raise kids in rural areas where there won’t be any opportunities for them?

Different people have different preferences, for sure. I used to feel that way when I lived in a small town with no amenities. But now I'd hate to move back to a major US city, for the reasons I list above. I'm not interested in raising kids, but if I was, it wouldn't be in SF, Seattle, Austin, Denver, or NYC. I'd raise kids someplace where I could let them walk around and explore in a safe way -- the situation on th…

What job prospects would your kids have, and would it even have been possible for you to start your career if you lived in the area you are planning to move to for the critical years (high school, university, first few years entering your field, etc.)?

If the answer to any of these questions is no, then you have your answer to why property prices near the cities aren't ever going to match the level of rural properties.

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

#200

Post by lupire »

dont__panic wrote: post #43
dragonwriter wrote: post #32

Earlier quoted context omitted.

> 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.

High housing prices == high rental prices == people living in smaller spaces == people deciding to have fewer or no kids because they don't have the space (or money). Of course, plenty of people start families without solid economic footing. But it's a bit harder to invent space out of thin air than it is to take on debt.

How big was the house your grandmother lived in with 5 siblings? Less than 1500sqft

Houses are something like more than double the size they were just 40 years ago, and families are smaller.

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