4 ms·

Housing prices have doubled in the past decade. Home ownership has declined in the past decade. Seems like inflation to me.

UncleOxidant 7y ago
Housing and health insurance are the largest portion of many family budgets but for some reason don't seem to significantly enter into the inflation calculations.
- munificent 7y ago
  Cynical take: Because the people in power defining the inflation calculations don't want people to realize they're being fleeced.
- esoterica 7y ago
  Rent and health insurance are included in CPI.
  - UncleOxidant 7y ago
    But how much weight are they given?
    - tathougies 7y ago
      I will forever fail to understand why commenters on hacker news ask questions for which the answer is public and readily available. I think it's because they think that the answer to the question will favor them and the idea is that astute readers will do research and thus be convinced of the commenter's point. Unfortunately, in this case, an astute reader would do research and conclude that the point you are trying to make is completely mythical. Housing (total, rent + everything else) accounts for 42% of the CPI calculation, and the 'owners equivalent of rent' (i.e. how much you would have to pay to rent your home) makes up ~24%: https://www.bls.gov/cpi/tables/relative-importance/2016.pdf https://www.bls.gov/cpi/tables/relative-importance/2016.pdf That captures rent renters pay as well, since for apartment buildings, the owner's equivalent rent is the rent being paid.
      - Falkon1313 7y ago
        In PCE (Personal Consumption Expenditures), it's weighted half as much. Is the median person really paying only 12.9% (or 15.3%) of their income for rent? Seems like it's usually closer to 30-40%, and sometimes higher for the working class. (12.9%-15.3% of median household income is only ~$7740-9180 which would be only $645-765/mo.) That one at least weights medical care at 22.3% ($13380) vs the 6.2% ($3700) in CPI, although that might be realistic if the median person simply doesn't get medical care because they can't afford it.
  - hiram112 7y ago
    And they use BS games to minimize the increases - things like equivalency pricing. My health insurance hasn't gone up that much in the last 5 years on per month basic. The difference is instead of the $10 copay on day 1 that I used to have, I now have a $3K deductible and my in-network choices have been cut in half. I'm guessing there are similar games done with housing. For example, prices for condos in a lot of areas have probably kept pace with inflation, but meanwhile the HOAs have gone up from $200/month 10 years ago to $400/month now, and I suspect it's because government services have been cut. I doubt the fed takes into consideration things like my area is now so crowded, I pay $100/month to park whereas 10 years ago it was free. Same with tolls - the once free interstates have all been converted to toll roads in my area that cost $40/week to get to work.
opo 7y ago
Rent (and "owner occupied rents") are a part of the bundle used in calculating the CPI. The owner occupied rent is a calculation of what the rent would be if the owner had paid rent on the house they own. For some background on this: https://www.philadelphiafed.org/-/media/research-and-data/publications/working-papers/2004/wp04-22.pdf https://www.philadelphiafed.org/-/media/research-and-data/pu...
rayiner 7y ago
Median rents went up by 30% between 2007 and 2017: https://images.app.goo.gl/m9SwrkpQYhuNBMeaA https://images.app.goo.gl/m9SwrkpQYhuNBMeaA. That’s 2.6% per year, somewhat higher than the 2% inflation target, but not much. Housing is hard to gauge because the same house moves up market as areas develop. When I was a kid, Reston (where Google has a big office), was a solidly middle, even lower middle class suburb with old housing stock. Now it’s got a Metro station, tons of new shopping, tons of tech jobs. Reston is, now, what Clarendon was when was a kid. Rents have gone way up in Reston, but that’s not inflation. It’s paying more for a more in-demand, premium product. (The same thing happens with cars by the way. The Toyota Corolla was once Toyota’s low-end model. Now, it’s a mainstream sedan, with whole nameplate, Scion, filling the market segment previously targeted by the Corolla.)
- seekup 7y ago
  side note: Toyota shut down Scion in 2016
- hiram112 7y ago
  I lived in Reston for a few years. For being a quiet far-away bedroom community, it was funny to see how rents exploded, especially once the metro arrived. Apartments in the awful town center area were asking Dupont Circle prices with the 2 hour x 2 commute and $20/day parking and $10/day tolls it would cost to actually work in Dupont. DC is becoming an awful place unless you absolutely know where you'll be working for the next 20 years and can buy a home close to the office. Otherwise, you're not going to enjoy the 2.5 hour commute and $12 in tolls when client site location moves from Tysons to Silver Spring, MD. It's so crowded, though, because a lot of government workers and contractors who'd be making $50K in Anywhere, America can earn 6 figures after a bit of seniority in the gov. I'm planning on bailing for good. I could now only barely afford one of those tiny condos with a $500/month HOA nowhere near a metro in NOVA, but I'd never get to enjoy it as I'd be spending the majority of my day sitting in traffic. And wages in DC for techies aren't really that good compared to SV or NYC, since it's mostly set by government. Maybe Amazon will force the contractors to pay more.
- wavepruner 7y ago
  Rent isn't paid with debt, so is very different. You don't get to make magic money out of nothing to pay rent. But with the way the Fed is running things, almost anyone can create magic money out of nothing and buy a house. The money the bank lends you did not exist(save for the reserve requirement) before the loan was created. Also, inflation requires increasing demand for it to occur. The existence of increasing demand does not mean it's not inflation. That's why goods/services with no increasing demand do not inflate in an inflationary economy. Inflation has always been an uneven phenomenon.
conanbatt 7y ago
Inflation is the generalized increase of nominal prices. Housing has doubled but many other goods haven't.

UncleOxidant 7y ago

Housing and health insurance are the largest portion of many family budgets but for some reason don't seem to significantly enter into the inflation calculations.

munificent 7y ago
Cynical take: Because the people in power defining the inflation calculations don't want people to realize they're being fleeced.
esoterica 7y ago
Rent and health insurance are included in CPI.
- UncleOxidant 7y ago
  But how much weight are they given?
  - tathougies 7y ago
    I will forever fail to understand why commenters on hacker news ask questions for which the answer is public and readily available. I think it's because they think that the answer to the question will favor them and the idea is that astute readers will do research and thus be convinced of the commenter's point. Unfortunately, in this case, an astute reader would do research and conclude that the point you are trying to make is completely mythical. Housing (total, rent + everything else) accounts for 42% of the CPI calculation, and the 'owners equivalent of rent' (i.e. how much you would have to pay to rent your home) makes up ~24%: https://www.bls.gov/cpi/tables/relative-importance/2016.pdf https://www.bls.gov/cpi/tables/relative-importance/2016.pdf That captures rent renters pay as well, since for apartment buildings, the owner's equivalent rent is the rent being paid.
    - Falkon1313 7y ago
      In PCE (Personal Consumption Expenditures), it's weighted half as much. Is the median person really paying only 12.9% (or 15.3%) of their income for rent? Seems like it's usually closer to 30-40%, and sometimes higher for the working class. (12.9%-15.3% of median household income is only ~$7740-9180 which would be only $645-765/mo.) That one at least weights medical care at 22.3% ($13380) vs the 6.2% ($3700) in CPI, although that might be realistic if the median person simply doesn't get medical care because they can't afford it.
- hiram112 7y ago
  And they use BS games to minimize the increases - things like equivalency pricing. My health insurance hasn't gone up that much in the last 5 years on per month basic. The difference is instead of the $10 copay on day 1 that I used to have, I now have a $3K deductible and my in-network choices have been cut in half. I'm guessing there are similar games done with housing. For example, prices for condos in a lot of areas have probably kept pace with inflation, but meanwhile the HOAs have gone up from $200/month 10 years ago to $400/month now, and I suspect it's because government services have been cut. I doubt the fed takes into consideration things like my area is now so crowded, I pay $100/month to park whereas 10 years ago it was free. Same with tolls - the once free interstates have all been converted to toll roads in my area that cost $40/week to get to work.

opo 7y ago

Rent (and "owner occupied rents") are a part of the bundle used in calculating the CPI. The owner occupied rent is a calculation of what the rent would be if the owner had paid rent on the house they own. For some background on this: https://www.philadelphiafed.org/-/media/research-and-data/publications/working-papers/2004/wp04-22.pdf https://www.philadelphiafed.org/-/media/research-and-data/pu...

rayiner 7y ago

Median rents went up by 30% between 2007 and 2017: https://images.app.goo.gl/m9SwrkpQYhuNBMeaA https://images.app.goo.gl/m9SwrkpQYhuNBMeaA. That’s 2.6% per year, somewhat higher than the 2% inflation target, but not much. Housing is hard to gauge because the same house moves up market as areas develop. When I was a kid, Reston (where Google has a big office), was a solidly middle, even lower middle class suburb with old housing stock. Now it’s got a Metro station, tons of new shopping, tons of tech jobs. Reston is, now, what Clarendon was when was a kid. Rents have gone way up in Reston, but that’s not inflation. It’s paying more for a more in-demand, premium product. (The same thing happens with cars by the way. The Toyota Corolla was once Toyota’s low-end model. Now, it’s a mainstream sedan, with whole nameplate, Scion, filling the market segment previously targeted by the Corolla.)

seekup 7y ago
side note: Toyota shut down Scion in 2016
hiram112 7y ago
I lived in Reston for a few years. For being a quiet far-away bedroom community, it was funny to see how rents exploded, especially once the metro arrived. Apartments in the awful town center area were asking Dupont Circle prices with the 2 hour x 2 commute and $20/day parking and $10/day tolls it would cost to actually work in Dupont. DC is becoming an awful place unless you absolutely know where you'll be working for the next 20 years and can buy a home close to the office. Otherwise, you're not going to enjoy the 2.5 hour commute and $12 in tolls when client site location moves from Tysons to Silver Spring, MD. It's so crowded, though, because a lot of government workers and contractors who'd be making $50K in Anywhere, America can earn 6 figures after a bit of seniority in the gov. I'm planning on bailing for good. I could now only barely afford one of those tiny condos with a $500/month HOA nowhere near a metro in NOVA, but I'd never get to enjoy it as I'd be spending the majority of my day sitting in traffic. And wages in DC for techies aren't really that good compared to SV or NYC, since it's mostly set by government. Maybe Amazon will force the contractors to pay more.
wavepruner 7y ago
Rent isn't paid with debt, so is very different. You don't get to make magic money out of nothing to pay rent. But with the way the Fed is running things, almost anyone can create magic money out of nothing and buy a house. The money the bank lends you did not exist(save for the reserve requirement) before the loan was created. Also, inflation requires increasing demand for it to occur. The existence of increasing demand does not mean it's not inflation. That's why goods/services with no increasing demand do not inflate in an inflationary economy. Inflation has always been an uneven phenomenon.

conanbatt 7y ago

Inflation is the generalized increase of nominal prices. Housing has doubled but many other goods haven't.