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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

#221

Post by jimmydorry »

coding123 wrote: post #215
jimmydorry wrote: post #199

Earlier quoted context omitted.

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 propertie…

Programming jobs that are remote. I personally predict building homes will become a thing - as we reach 600k typical home sales level. We will find people building homes for 200k and selling them for 400k profit. The math is starting to make programming jobs not attractive to me at least. Do 1 per year.

Perhaps it will change in the future, but entering the field as a remote-only is an up-hill battle. Especially without contacts or experience. Not to mention that the bare necessity, a good and stable internet connection, is not really a thing yet. Perhaps StarLink will change that... but that's yet to be seen.

If people looked at this honestly, they would have to admit that relocating from a city into a rural area for the explicit purpose of raising kids is effectively taking a gamble on what thing might look like in the future.

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

#222

Post by Inhibit »

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.

Except that frogs, as (all? not a biologist) amphibians, have very good sensitivity to external temperature. Unlike humans.

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

#223

Post by jandrese »

mupuff1234 wrote: post #188
mschuster91 wrote: post #174

Earlier quoted context omitted.

> If people stop believing housing is a good investment then prices will fall. People need something to live in though, and as long as the demand for places to live is higher than the supply, rents and purchase prices will keep going up.

The population hasn't increased much (or maybe at all) in the last 2 years yet prices have sky rocketed - why is that?

Capitalism.

The government has completely failed its job of monetary policy, which in broad strokes is to provide back pressure on capitalism's natural tendency to have money move upward. Today there is way too much money at the top and it has nowhere to go. The economy is less and less resembling a healthy marketplace and more medieval feudalism, with lords stuck in their opulent castles while the peasants farm dirt. The more evenly money is spread across the entire spectrum of society the better the markets work. This is one of the side effects of highly progressive taxation and strong social programs--a healthy economy.

Instead our politicians have been focused on reducing taxes for the ultra rich and this has only accelerated the consolidation of money at the top, which is why our economy is getting heavily distorted and why for people on the bottom they have only been getting poorer. Once you factor in rent/mortgage, health care, and inflation versus wage growth the average American is backsliding and has been doing so for many years now. This is a massive failure of fiscal policy, but nobody in Washington cares because the lobbyists and special interests are happy.

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

#224

Post by jimmydorry »

wonderwonder wrote: post #217
jimmydorry wrote: post #199

Earlier quoted context omitted.

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 propertie…

A huge number of tech focused jobs are remote first currently. Plus just because you grow up in the middle of no where what is preventing you from going to college somewhere else and even settling there? I see no reason why being a child in a rural area would limit you from college onwards provided you graduated highschool with a decent gpa.

I addressed this in the second part of my post:

>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.

If the opportunities are mostly in the city, don't expect the cost of city dwellings to approach the cost of rural dwellings.

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

#225

Post by throw0101a »

onlyrealcuzzo wrote: post #54
nradov wrote: post #28

Earlier quoted context omitted.

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 don't need to purchase a home - but historically - if you did - you've been much better off financially. It's the same as saying you don't NEED to go to college. No, you don't. You don't need much of anything... But if you did go to college - whether through correlation or causation - statistically you are much better off. So if college and housing get out of reach for most people - then maybe they will be worse…

> You don't need to purchase a home - but historically - if you did - you've been much better off financially.

[citation needed]

Per the The Credit Suisse Global Investment Returns Yearbook 2018, the global return for real estate from 1900 to 2017 was 1.3%, while stocks returns 5.2%:

* https://www.credit-suisse.com/media/assets/corporate/docs/ab...

Rent is often cheaper than mortgage payments, and is very more often cheaper than mortgage payments plus the cost of maintaining a home. If you take the difference and investment you can have just as must equity in a few decades. Preet Banerjee goes over the math in this ten minute video:

* https://www.youtube.com/watch?v=KAMeI4uHAFE

He rents:

* https://www.speakers.ca/2013/10/preet-banerjee-sold-his-hous...

If you want to know when it makes financial sense, the "5% Rule" by Ben Felix is a decent place to start:

* https://www.youtube.com/watch?v=q9Golcxjpi8

* https://www.youtube.com/watch?v=Uwl3-jBNEd4

Until recently he was a renter, but purchased a house 1-2 years ago. Not exactly happy with the decision though:

* https://www.youtube.com/shorts/L5SAF0SHD1w

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

#226

Post by s1artibartfast »

dont__panic wrote: post #213
lupire wrote: post #200

Earlier quoted context omitted.

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.

Oh, it's definitely possible to raise a large family with small square footage. My grandparents raised my father in a 3 bedroom house that can't be more than 1500 square feet. And my dad has 6 siblings! It does depend on what families are willing to put up with, though. I'm not sure many of my millenial peers want to raise 7 kids in a 1500 square foot house. It's important not to ask what's physically possible , but…

Yeah I think you can't ignore the last part about expectations. I think younger Generations are just less willing to compromise on lifestyle to have children. The social institutions that made it much more attractive are crumbling. One obvious one of the churches, and the other is local community. It's one thing to want to have kids when all of your friends are doing it and you live together and can raise them together. Many of these communities are going away

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

#227

Post by kixiQu »

oh_sigh wrote: post #207
josefresco wrote: post #195

Earlier quoted context omitted.

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.

I'm sure if they just paid a little bit more they would attract people to drive into the town from the assuredly cheaper nearby towns.

It's useful to see what happens when this isn't possible:

https://www.outsideonline.com/culture/essays-culture/how-to-...

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

#228

Post by nradov »

Dudeman112 wrote: post #55
nradov wrote: post #28

Earlier quoted context omitted.

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.

>That's an investment, not a living expense. Owning a home isn't just an investment, it's QoL. Renting is shit, and raising kids in rented space is shit too. If someone moderately cares about their QoL and isn't enamoured with the idea of popping kids not having their own place won't help with deciding to make kids.

Some people find that renting is better from a QoL perspective. Owning is shit if you hate having to deal with home maintenance, or travel a lot, or have to move frequently for work. Others prefer the stability of owning.

But so what? Nothing in your comment is relevant to inflation calculations.

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

#229

Post by cjmb »

throw0101a wrote: post #183
acd wrote: post #41

I 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…

> Thus central banks cannot control inflation in a global market. Japan enters the chat https://fred.stlouisfed.org/series/FPCPITOTLZGJPN

This is actually a picture of national failure, tantamount to celebrating a blowout losing scoreboard. It is not a model for others to copy.

Productivity and inflation are very related to each other. Per your chart, "Japan enters the chat" in the mid 1980s. If you're curious what has happened to Japan since the mid 1980s you can read https://en.wikipedia.org/wiki/Lost_Decades (this wikipage was pluralized from "Decade" to "Decades" in the last couple of years, due to the continued struggles of the Japanese economy).

To the extent that you hold central banks responsible for the national-economic state of things, Japan's central bank ought to be considered a massive failure.

If you lean towards the Krugman side of things, you can find his explanation of that failure here: https://web.archive.org/web/20161203180303/https://krugman.b...

If you prefer the Scott Sumner side, you can find his explanation of that failure here: https://www.themoneyillusion.com/why-japans-qe-didnt-work/ https://www.themoneyillusion.com/the-other-money-illusion/ https://www.themoneyillusion.com/rooseveltian-resolve/

Personally, I tend to sympathize with central banks and take a more muted view of their powers at the national-economic level. In my model, Japan's central bank was/is powerless given the magnitude of non-financial headwinds the country face(d) after the opening of China and beneath 2 decades of aggressive anti-Japanese trade policy from their largest trading partner (USA). This is a (slightly) heterodox take, and you can read my articulation of this view here: https://www.conradbastable.com/essays/unequal-growth-the-zer...

But whatever your take, Japan's economic struggles should not be mistaken for signals of success.

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

#230

Post by 908B64B197 »

Jasper_ wrote: post #203
908B64B197 wrote: post #198

Earlier quoted context omitted.

> 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?

The supply was fine before multi-home owners and property management companies took up most of it and jacked up the prices. Increasing the supply would only increase the wealth of the homeowners, it won't lower prices. Increasing the supply means building new buildings, and that often means building huge lots of five-over-ones, priced as luxury apartments in a growing market. The people building the new supply expect…

> We see this in big cities where vacancies are at an all-time high (aka a lot more supply), but prices aren't going down.

Where?

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