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

#231

Post by yossarian1408 » Fri, May 27, 2022, 4:48 PM UTC

KptMarchewa wrote: post #19

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…

Sure, everyone has it's own personal inflation, but I don't see why can't we look at aggregate data.

It's not even that. There are different drivers of inflation, it could be spurred by supply shocks, increased demand, greater supply of money, uncompetitive markets arising from government capture, etc., the economy is so complex that when you consider all these moving parts, a claim like "interest rates go down, inflation goes up" starts to sound incredibly reductive.

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

#232

Post by nostrademons » Fri, May 27, 2022, 4:50 PM UTC

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…

But eventually the vacant apartments will get rented out because they're costing their owners money (in taxes, mortgages, maintenance) and not bringing any in, and you can't spend more than you make forever.

Rents go down when landlords go bankrupt.

That's what happened in 2009-2010. It took about 4 years after peak homebuilding, and 2.5 years after peak home prices, and about 12-18 months after the financial crisis started. Real estate tends to lag financial markets by about that time period. But it does happen - eventually markets respond to supply and demand, and firms that try to buck the trend get swept out of the market.

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

#233

Post by willcipriano » Fri, May 27, 2022, 4:50 PM UTC

bombcar wrote: post #208

ghaff wrote: post #166

Earlier quoted context omitted.

>People also wildly underestimate just how much taxes and maintenance can be, because they're not monthly - if you have to escrow taxes it's more noticeable, and if you correctly account for maintenance it's surprisingly high, even on relatively new homes. Even if a house is fully paid off, there are a ton of expenses that relate to ongoing maintenance of a house and property that really can add up--plus taxes and in…

Yeah, even a furnace replacement (was about $8k let's say, including AC) that should be done every 20-30 years is $25-35 a month - those things start to add up if you account for all of them. Roofs are 40 year so you might escape that one, but all the appliances are probably 10-15 year lifespan, and most people wouldn't even think of a new fridge as "maintenance".

One thing to note is you can put things off. My furnace is from the early 80's, I'll replace it when it dies but it works fine. I'm kinda looking forward to it so I don't have to use window units for AC anymore.

If the idea is you want a immaculate house with everything perfectly maintained then you can have high costs, but for example my microwave door handle busted off, I rigged up a fix, it looks terrible but not bad enough that I want to spend the money to replace it until it is completely dead.

The recommend replacement interval is useally a little pessimistic especially if you buy quality meterials and pay to do the job right.

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

#234

Post by asperous » Fri, May 27, 2022, 4:52 PM UTC

lr4444lr wrote: post #180

Naive question: why couldn't the government use something like a 12 month moving average? That way we'd keep the variable, but limit the weight of its volatility.

You can do this across the whole index if you want already, and many sources do report annual changes only: https://fred.stlouisfed.org/series/FPCPITOTLZGUSA

As for why a moving average isn't used for this one price, if they did it that way prices would be 12 months old and wouldn't reflect the most up-to-date economic conditions.

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

#235

Post by jandrese » Fri, May 27, 2022, 4:54 PM UTC

chii wrote: post #81

onlyrealcuzzo wrote: post #54

Earlier quoted context omitted.

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. it's not the purchase of the home that made you better off financially, but the ability to purchase a home. If you had that ability, investing in another asset at the same leverage level (such as shares) would net you even more financial income (obviously, its higher risk).

> If you had that ability, investing in another asset at the same leverage level (such as shares) would net you even more financial income (obviously, its higher risk).

This sounds like Reddit "live in your Mom's basement to save on rent" type financial advice. It doesn't work if you have to use that money to pay rent. Rents tend to be about the same or more than a mortgage. If you happen to live in an area where rents are considerably lower than a mortgage than this is an outside possibility, but this also depends on your rents not skyrocketing over the course of 30 years. One of the great things about 30 year fixed loans is that they allow you to ride out market insanity.

This is the dirty little secret of these housing bubbles. It's mostly the poor who get seriously burned, because people with money have mortgages. They don't have to find a way to pay a rent that increased 40% this year. In fact many of the people are the landlords who are enjoying a massive windfall thanks to the housing crisis. They have an incentive to make sure it continues.

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

#236

Post by nradov » Fri, May 27, 2022, 4:55 PM UTC

formerkrogemp wrote: post #116

mymythisisthis wrote: post #64

Earlier quoted context omitted.

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…

Yes, college enrollment, high school enrollment, and labor participation are all down, starting last year. People can't afford new houses with a mortgage with rising interest rates. Fewer young adults ("Gen Z") are choosing, proportionally, to go to college. The plummeting birth rate and the highly strict immigration controls as well as our political instability have all sent the message to international students tha…

Nursing school enrollment is higher than ever.

https://www.aacnnursing.org/News-Information/Press-Releases/...

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

#237

Post by em-bee » Fri, May 27, 2022, 4:57 PM UTC

ChuckNorris89 wrote: post #163

em-bee wrote: post #107

Earlier quoted context omitted.

in germany and austria time limited renting contracts are illegal. renting is always month to month, but landlords have no rights to evict anyone ever unless they do damage to the property or fail to pay their rent for at least a few months, and they still may have to sue to actually make the eviction stick. the only exception is landlords who only rent out a single home, and they can prove that they now need that ho…

>in germany and austria time limited renting contracts are illegal No they're not illegal. In Austria you see time limited rental contracts all the time, usually 3 years. It's rare to find unlimited rental nowadays as landlords want to make money.

oh, sorry, i just looked it up. you are right. austria does allow time limited contracts. 3 years is the minimum, however. you can't have shorter time limits. also after the first year the tenant may terminate the contract any time (with 3 months advance notice), the landlord may not. and there is another interesting detail: time-limited contracts must be 25% less than comparable unlimited contracts. this however is rarely enforced unless the tenant notices. (they can get back overpaid rent for up to 10 years).

germany doesn't allow time limited contracts. there are only two exceptions. a time limited contract is allowed if the landlord can claim to need to use the property themselves after the end of the contract (which they can only do if they don't have multiple properties to rent), or if they have plans to tear down or renovate the building.

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

#238

Post by throw0101a » Fri, May 27, 2022, 5:01 PM UTC

cjmb wrote: post #229

throw0101a wrote: post #183

Earlier quoted context omitted.

> 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 "Decad…

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

It's "losing" because Japan wants inflation. They've had the opposite problem the rest of the planet has. Inflation (generally) means there's some kind of economic activity.

I'm well aware of Krugman's thoughts on Japan. See his 1998 paper:

* https://www.brookings.edu/bpea-articles/its-baaack-japans-sl...

My post is a counter-point that somehow a global economy (always) means that central banks can't do anything. Just compare the US and the EU in the 2010s, and you'll see different trajectories.

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

#239

Post by ChuckNorris89 » Fri, May 27, 2022, 5:03 PM UTC

em-bee wrote: post #237

ChuckNorris89 wrote: post #163

Earlier quoted context omitted.

>in germany and austria time limited renting contracts are illegal No they're not illegal. In Austria you see time limited rental contracts all the time, usually 3 years. It's rare to find unlimited rental nowadays as landlords want to make money.

oh, sorry, i just looked it up. you are right. austria does allow time limited contracts. 3 years is the minimum, however. you can't have shorter time limits. also after the first year the tenant may terminate the contract any time (with 3 months advance notice), the landlord may not. and there is another interesting detail: time-limited contracts must be 25% less than comparable unlimited contracts. this however is…

Yeah, but finding a decent place to rent in Germany is the real problem.

It's nearly impossible as everyone is locked into their rental units and will never move.

You basically have to wait for someone to die.

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

#240

Post by ghaff » Fri, May 27, 2022, 5:04 PM UTC

willcipriano wrote: post #233

bombcar wrote: post #208

Earlier quoted context omitted.

Yeah, even a furnace replacement (was about $8k let's say, including AC) that should be done every 20-30 years is $25-35 a month - those things start to add up if you account for all of them. Roofs are 40 year so you might escape that one, but all the appliances are probably 10-15 year lifespan, and most people wouldn't even think of a new fridge as "maintenance".

One thing to note is you can put things off. My furnace is from the early 80's, I'll replace it when it dies but it works fine. I'm kinda looking forward to it so I don't have to use window units for AC anymore. If the idea is you want a immaculate house with everything perfectly maintained then you can have high costs, but for example my microwave door handle busted off, I rigged up a fix, it looks terrible but not…

You can incur "maintenance debt" like anywhere else and some cans kicked down the road end up not needing to be done or being done in a different/better way. But as someone who lives in an old house, you do need to keep up to some degree especially with things that are only going to get worse if left alone.

I agree the parent lifetimes are probably a bit low. But the basic point that annual costs for a house/property are significant even if you can trim a bit at the margins.