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> When house prices go up, this measure goes up by a similar measure. That’s only true if you assume interest rates aren’t falling. Artificially low interest
by vivafrance 8y ago
> When house prices go up, this measure goes up by a similar measure.
That’s only true if you assume interest rates aren’t falling. Artificially low interest rates have inflated the actual price of housing while keeping monthly payments fairly steady.
The Fed is then able to say “look, no inflation!” despite actual prices rising very rapidly.
- JumpCrisscross 8y ago> Artificially low interest rates have inflated the actual price of housing while keeping monthly payments fairly steady There's a case to be made for each approach. Given we have excellent ways of measuring house prices, but no great ones for cost of living, having CPI measure the latter and thus usage--instead of user costs--seems reasonable. (We don't include stock appreciations and declines in inflation, for example.)
- djrogers 8y agoThose interest rates didn’t fall over the past decade, they stayed very consistently low, so the rise in house costs caused a rise in mortgage payments and imputed rents.