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…
> Houses aren't normally consumed. That is just a technicality. Housing is the greatest one time and recurring expense most people have and change in prices for housing has the greatest impact on their perception of how expensive things are.
That's the problem with house prices, regardless of whether or not you think they should be included in CPI, being that the average person is likely to only buy one or two in their life, leaving very little data about how their perception has changed over time. The best reason for choosing a measure of consumables is that they are purchased frequently by most people, providing information about how perceptions are changing on a regular basis.
> has the greatest impact on their perception of how expensive things are.
That would be more significant if we were talking about cost of living, but since we're talking about inflation, the actual goods selected in the basket don't matter all that much. The basket just has to be large enough to filter out the noise of individual products that have increased in value at a rate faster than the currency (or vice versa). And as it pertains to Canada, housing has appeared to be especially noisy of late, making it a poor choice for tracking inflation even ignoring all of the other problems with it.