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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

#271

Post by bombcar »

coding123 wrote: post #211
bombcar wrote: post #181

Earlier quoted context omitted.

People define "rural" vastly differently - most "rural" areas in the USA are actually peppered with small towns (between 10 and 10k residents) which can be covered by high speed internet and even effective public transportation if desired - in a small enough town that can just be a guy with a van hired by the township. All you're really missing then is the connection to the nearest urban center - if it takes an hour…

Rural for me is 10 acre plots - can't see your neighbor too much. Rural for others is 40 acre plots. For some it's 400-1000.

Heh I feel most people think of "small town America" when they think rural, which often includes almost all of the midwest outside of Chicago.

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

#272

Post by sokoloff »

Rury wrote: post #259
randomdata wrote: post #150

Earlier quoted context omitted.

I would say the easiest way to explain it is, as implied by the "C", that CPI is intended to track consumption. Houses aren't normally consumed. Your house a decade from now is expected to be, more or less, the same house you purchased originally. You expect, more or less, to be able to sell it for at least as much as you paid for it originally. Whereas a consumable good, like food, is used up once you eat it and the…

>they question if CPI is the best metric for measuring inflation, not whether or not durable assets should be considered consumables Right. Inflation is supposed to be a measure of erosion in purchasing power. Why should we leave out durable assets (which are purchasable things) from that measure and only consider consumable things? I get that's not CPI's intended purpose, but then why do people use it for defacto in…

An oil well, a farm, an ounce of gold, and a share of $AAPL are also durable assets and purchasable things. Should they be included in CPI as well?

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

#273

Post by 2fast4you »

jsmith45 wrote: post #243
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…

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…

I think all of those cases should be reported as vacancies. Those are shelters going unused, that other people could be using. And I think they're relevant to the current discussion because those unused homes are taking up the extra supply, increasing price

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

#274

Post by willcipriano »

moistly wrote: post #265
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…

Your old furnace may well be costing you more in fuel than the cost of replacement. A 1980s furnace is likely well under 60% efficient, plus it drafts inside air up the flue. A new furnace will be 90%+ efficient and the firebox will use outside air.

My house is under 1200 sqft and at night in winter we turn the heat down real low and just use space heaters in the bedrooms to take the chill off. We also got new, high end windows in the bedrooms so the space heaters run for about 15 minutes total. Also I like to sleep cold. Payback time is something like 10 - 15 years if it was twice as efficient given the math I did. Instead of a heater I got the basement redone as that was becoming a issue.

Part of me is also sort of thinking that each year I wait the heater I will get in the future will be a little more efficient. I've been thinking about replacing it since I moved in but just recently I'm hearing people in my area talking about heat pumps so I might see if I can give it another year or two and see if that becomes more mainstream and go that way.

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

#275

Post by TheCoelacanth »

sokoloff wrote: post #9
gilbetron wrote: post #4

For those that only read the headline, the article is much more interesting. There's a paper that recreated what the inflation rate would have been with the old method, and it tracks the new method closely, but just has more volatility. Plus, "the government" didn't take home prices out, they just switched to a different approach to tracking them.

I think the “new” (now 39 years old) method is superior overall, but I think it’s entirely factually correct that they took home prices out of the index. They did not take housing expenses out, which is what many people whose sole exposure to economics is via memes seem to think/be encouraged to think.

The headline is technically correct, but incredibly misleading to people who don't read past the headline.

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

#276

Post by s1artibartfast »

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 think the impact of rural jobs are largely irrelevant if you think your kids will be high skill workers.

I grew up in a rural community and the path is quite simple. Grow up there, leave for university, go where the jobs are or go back and work remotely.

Cities will always be more expensive, but that is to be expected.

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

#277

Post by adam_arthur »

CincinnatiMan wrote: post #266
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 don't think it's that simple. Maybe if someone has lots and lots of investment homes, they may think that way, but someone owning a single home shouldn't be excited about its price inflating--it's not like you can sell it and reap the profits, because you'll just be buying another similarly inflated house.

You can do a cash out refi and invest into other higher yielding cashflowing assets. People do this all the time for e.g. renovations, additions etc

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

#278

Post by 1270018080 »

908B64B197 wrote: post #198
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.

> 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?

That's always the answer. For some reason it's makes some people on here angry, but the only long term viable solution to expensive housing is to end NIMBYism and draconian zoning laws. Anything else is a short-term half-measure, including affordable housing, rent controls, etc.

If you want to actually solve the housing crisis, you just have to build more housing. It really is that simple.

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

#279

Post by FooBarBizBazz »

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?

This appears to be a 2016 column from a local paper, but it includes a number of interesting quotes from the time period:

https://sites.google.com/a/lanepl.org/columns-by-jim-blount/...

I think it gives a decent window into what was being discussed then, as I understand it.

It's a little hard to Google references that give a feeling for the issues that were on peoples' minds at the time (like the precedent of the Bonus Army), because attention/salience (what "matters" in the culture) has changed a lot since then (and even since 2016).

I had thought that maybe the bill itself would have a revealing preamble, but it doesn't really. The official name does say something though: "Servicemen's Readjustment Act of 1944".

I think people were very interested in taking lessons from WW1 and avoiding the same problems that had occurred afterwards. Not only would the GI Bill be emblematic of this, but also, say, the difference between the Marshall Plan and the Treaty of Versailles.

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

#280

Post by lalaland1125 »

1270018080 wrote: post #278
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?

That's always the answer. For some reason it's makes some people on here angry, but the only long term viable solution to expensive housing is to end NIMBYism and draconian zoning laws. Anything else is a short-term half-measure, including affordable housing, rent controls, etc. If you want to actually solve the housing crisis, you just have to build more housing. It really is that simple.

> For some reason it's makes some people on here angry

It's because some people here own real estate and don't want to see YIMBY policies that would cause their rental income to fall

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