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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

#241

Post by jjoonathan »

tayne wrote: post #216
Jasper_ wrote: post #203

Earlier quoted context omitted.

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…

I do real estate for a living and this opinion is like a zombie that never dies no matter how many times it is proven wrong. You are putting forward that landlords acted collectively to increase the price of realestate. This is obviously wrong. The price of homes is determined by the market. It doesn’t matter who owns those homes, they are worth what the market says they are. Landlords do not control the market and e…

Nice try.

Landlords and homeowners and the finance industry don't control the market... they just form a political bloc that controls zoning and taxes and transportation infrastructure and central finance, and these knobs in turn control the market. For some reason, they always vote for policies that pump their holdings. Can't imagine why. These policies do create problems, though, and it's not only reasonable to attribute the problems back to the people who voted for them, it's unreasonable to do anything else.

"It's just the market!" is on par with "Look, a squirrel!" in terms of critical thinking.

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

#242

Post by willcipriano »

ghaff wrote: post #240
willcipriano wrote: post #233

Earlier quoted context omitted.

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…

I agree you have to think about it, but things like appliances generally don't cost more to replace if you wait. If you have leaky roof or a wet basement take care of it as it will be cheaper to do now but those types of things don't make up the bulk of the maintenance costs, it's mostly little stuff that you can let slide if you need to. Other things like pest control you can do yourself with a little reading and call someone if it gets out of hand.

My point is mainly maintenance costs are a lot more flexible than rent. You don't fix a washing machine, you won't have a washing machine. Don't pay the rent and your out on the street.

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

#243

Post by jsmith45 »

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…

Be careful with vacancy numbers. Some sources seem to include houses that should not be considered part of the housing supply.

There are people who own vacant houses that they have zero interest in renting, and are not looking to sell. This could be a vacation home for a billionaire that they seldom get around to visiting, but want to have ready for them, and just have staff check in periodically. Renting it when not in use may be uninteresting (have to lock up their belongings, arrange some form of management company, have insurance concerns (if somebody realizes they are renting from a billionaire, they might get "hurt", hoping for a big quick payday) etc.)

Similarly there are vacant houses own by speculators that have zero interest in renting out the unit, and are not currently looking to sell, since the market isn't right yet.

This is among many other scenarios where vacant does not mean available to rent or purchase (well at least not at anything close to market rates. Some of these people may reconsider if offered way above market rates, but that generally only happens if a property is uniquely valuable to just that one buyer.)

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

#244

Post by ghaff »

jimmydorry wrote: post #199
dont__panic wrote: post #160

Earlier quoted context omitted.

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 propertie…

I'd just note that there is a huge amount of territory between middle of nowhere and Manhattan.

For example, I live about 50 miles west of Boston. There's lot of forest and field around me with an apple orchard and a Christmas tree farm next door. It's a small town and I think is technically classified as "exurban." No, I can't walk except to the forest paths but there's no shortage of shops, hospitals, etc. within a fairly short drive--and I can certainly drive into the city for events if I want to.

I work remotely but my local office is actually nearer my house than it is to Boston and that's true of a lot of tech-adjacent companies in Massachusetts which weren't historically in the city.

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

#245

Post by ihattendorf »

01100011 wrote: post #104
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.

Anecdotal: my wife and I are waiting for a home to start a family. We're not even going to stop contraception until we move in. The second we do, we'll start trying. Fortunately it looks like a 10% correction is all we need, and, fingers crossed, it looks to be coming.

What are you going to do if the 10% correction comes after prices have increased 15%?

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

#246

Post by BlargMcLarg »

lordnacho wrote: post #194
FooBarBizBazz wrote: post #135

Earlier quoted context omitted.

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?

In GP's context, no. The basics of the theory is a lack of incentives for young men to play the game, which leads to either proactive destruction or passive destruction. War usually leads to a surplus of women and a lack of male competition in any other area (jobs, land, wealth, opportunity), incentivizing men to play according to the social contract rather than being violent or giving up. In fact, some would say starting a war is seen as a society killing off its surplus men in hopes of getting something out of it (every war is a rich man's war).

It's difficult to get decisive evidence as the phenomenon tends to happen at the same time as other things, and it basically devolves to game theory. At the very least, it seems like a very, very bad idea to incentivize the population with the largest capability to destroy, to destroy. Especially when they are necessary to create, educate and set an example for the next generation of men.

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

#247

Post by loeg »

rnk wrote: post #169
loeg wrote: post #147

Earlier quoted context omitted.

You can discount the principal payments somewhat, too, because you'll lose 10% of total value selling.

Why do you lose 10% selling? 6% for real estate cartel commission I guess. If you are in a hot market you can use redfin or similar low rate companies, don't pay the buyers agent. I'm trying to talk myself into it. No one is doing $60k of work selling your million dollar place.

6% to the cartel and another 3-4% in other transaction fees (title fees and insurance, excise tax, etc).

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

#248

Post by mywittyname »

em500 wrote: post #130
mywittyname wrote: post #109

Earlier quoted context omitted.

The new methodology is clearly the better one. But headlines like this serve to reinforce the notion that somehow the "official" inflation figures are wrong. Which gives power to politicians who deliberately push this narrative; which is to day, dishonest ones. The fact is, lots people hear that "housing prices" aren't included in the CPI, and interpret that as housing costs are not included. There is no nuance for m…

How do you speak clearly and plainly about these topics? It's factually true housing prices aren't included in the CPI, but it's not easy to explain why and how replacing it with the somewhat abstract notion of housing services , estimated by owner equivalent rent is conceptually superior.

I'd say, "the cost to house ones family is included in CPI calculations." That's clear and accurate.

Focusing on subtle technical differences is not helpful for laypeople. Consider if you had a tire that kept going flat, so you take your car to the mechanic and tell them, "something is wrong with my wheel" then having them come back and say, "no there isn't." Because, technically to the mechanic, tires are the rubber part and wheels on the metal part, and there is nothing wrong with the metal part.

That's what people are doing by saying "house prices aren't included" in the CPI. While technically correct, the implication to normal people is that the costs associated with shelter are completely omitted from the CPI.

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

#249

Post by FuriouslyAdrift »

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.

That's called urban sprawl...

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

#250

Post by abrichr »

joneholland wrote: post #124
jjslocum3 wrote: post #76

Mortgage 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…

Interest rate below inflation? I don’t care about that 300k, I would have lost it to inflation anyways. Mortgages let you pay 2052 dollars against 2022 prices and that’s under appreciated by the financially illiterate.

> Mortgages let you pay 2052 dollars against 2022 prices and that’s under appreciated by the financially illiterate.

Can you please clarify, or point towards additional reading material?

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