3 ms·
I've always wondered what the reasoning for not including housing in the CPI is.
by kspaans 10y ago
I've always wondered what the reasoning for not including housing in the CPI is.
- eli_gottlieb 10y agoBecause the culturally normative lifestyle in the USA is to own your housing, not rent it. You're thus supposed to count housing inflation as a rise in your asset portfolio, not a rise in costs.
- cm2187 10y agoBut typically people borrow to buy, and the more expensive the property the more they have to repay, so the impact on their purchasing power is the same as if they were all renting.
- slv77 10y agoHousing prices used to be factored into the CPI but were removed in 1983. The CPI is supposed to measure only consumption but housing is both consumption and an investment. It was replaced with owner equivalent rent which is represents just the consumption component of housing. In 1983 the Federal Reserve chairman at the time (Volker) also likely found the change convenient because it gave him more room to raise rates in the face of crushing asset deflation while reigning in inflation from the 70's.
- redblacktree 10y agoKeeping the number low.