5 ms·

The consumer price index is a joke. House prices doubled and the consumer price index shows low inflation for the same period. I don't care about the price of

The consumer price index is a joke. House prices doubled and the consumer price index shows low inflation for the same period. I don't care about the price of a smartphone or whether spaghetti became 10 cents more expensive. I care about whether or not I will be able to afford a house through a lifetime of work. And it's looking bad at that front. I'd literally have to pay back debt for longer than I still have to work before retirement.

SpicyLemonZest 6y ago
The consumer price index is an average over an economy with a bunch of heterogenous goods, and a bunch of people who care different amounts about different subsets of them. I tend to agree that cheap housing is more important than cheap spaghetti or cheap iPhones, but that doesn't mean the CPI is wrong; it's just measuring something different than the details of what an optimal household budget ought to look like.
harryh 6y ago
If you believe that inflation is actually much higher than is generally believed by the public/markets you shouldn't care so much about mortgage payments > 10 years from now on a loan with fixed payments. The huge inflation you expect will mean the real cost of these payments dwindle in size so they will matter very little to you.
- paganel 6y ago
  The issue is of course that the salaries/wages don't get raised as much as the other costs mentioned by the OP (housing, among others, I'd add education), they haven't done so for quite a long time now. In order to be able to have "real cost of payments" going down because of inflation you'll still need some down-payment or some basic proof that you'll be able to pay back the loan you're about to get, and those stagnating wages often times are not enough for that.
  - harryh 6y ago
    When a subset of goods are rising in price at a faster rate than other goods you aren't really talking about inflation anymore. You're talking about something else. It's pretty important to recognize the distinction.
    - paganel 6y ago
      > subset of goods are rising in price This is not a random subset of goods, we're talking about basic things like housing (as also mentioned by someone above) and education. It's not like the diamonds or the yacht markets have gone through the roof while everything else has remained pretty much stable, we're talking about stuff that affects almost everyone in their day-to-day life.
      - harryh 6y ago
        I'm not saying that these price increases don't matter. I'm saying that they aren't caused by inflation and that recognizing the distinction is important.
        turbinerneiter 6y ago
        I think that depends on how you use the word inflation. Some posts up someone defined it in eco science terms. Some people define it via the consumer price index. The consumer price index is what governments and and companies use in salary negotiations. So for people, the consumer price index is what drives their salary. If this consumer price index is not adequately factoring in the price of houses (cost of housing) or stocks (price of saving for retirement), than they are skewed. Salaries will trail behind rising cost aka. my generation is basing social status on smartphones instead of houses, because we can't afford houses. Now, low interest rates play an important counter role: it is cheaper to finance a house. It due to the increased prices, it takes a lot longer. Combine that with the fact that my generation deals with less worker rights and job safety (they call it flexibility) and the fact that I have now seen two once in a lifetime economic crisis within 12 years ... It's getting quite hard to sign that 40 year finance plan. There is however a solution to this, which is to leave the cities and move to the countryside, where I can build a house on a plot of land that used to be part of my grandma's farm. Not everybody is that lucky tough and not everybody can a find a job there or work remote. Hell, I'm not sure if I can, given that the internet there is still copper based. In my opinion the issue is that to much money goes into buying existing things and to little money goes into creating new things. QE and other gov. measures seem to be going mostly into propping up prices of existing values, so the ones who own them don't lose virtual money.
defertoreptar 6y ago
Median sale price of houses sold has increased 2% from November 2019 to November 2020. https://fred.stlouisfed.org/series/MSPNHSUS https://fred.stlouisfed.org/series/MSPNHSUS That's on par with historical annualized inflation rates.
- fakedang 6y ago
  Your median sale price index compares house prices in some random Southern hell hole in Mississippi to a disaster ravaged area of Puerto Rico with NY and SF or Atlanta and Austin house prices. Places where people can actually go to work.
  - okaram 6y ago
    I think this is the median house price ... sort all the prices for houses sold in the USA in a year, pick the one in the middle, so ...
    - fakedang 6y ago
      The middle can shift to the right easily if you exclude houses in some random houses in the middle of nowhere, while retaining exclusive country neighborhoods that people still move to and commute to and from for work.
  - defertoreptar 6y ago
    The nice thing about the median is that it's robust against outliers like the ones you've mentioned. It's over $300k, so we're definitely not talking about some hellhole in MS.
    - fakedang 6y ago
      How about median house prices in all major employment zones in the US? I'm sure that would filter out all the small places in the country while also including places in the country used by the old money Brahmans. In either case, you still can't compare house prices in Albany to house prices in NY, which these median measures happen to weight in, even if slightly. Exclude a thousand such places and the median shifts to the right.
throw0101a 6y ago
> House prices doubled and the consumer price index shows low inflation for the same period. And? In Canada, the CPI has Shelter as 27%, with Owned accommodation being 17%: * https://www150.statcan.gc.ca/n1/pub/71-607-x/2018016/cpi-ipc-eng.htm https://www150.statcan.gc.ca/n1/pub/71-607-x/2018016/cpi-ipc... What's the component breakdown for the US CPI? Just because prices for some things are up does not mean prices for all or even most things are. And even though prices are up, mortgage rates are down, which may result in a net-zero change to affordability (i.e., your monthly carrying costs end up being the same). Heck, some Danish mortgage rates went negative in 2019: * https://www.theguardian.com/money/2019/aug/13/danish-bank-launches-worlds-first-negative-interest-rate-mortgage https://www.theguardian.com/money/2019/aug/13/danish-bank-la...
BLanen 6y ago
CPI is mostly for boomers that already have their house ownership secured. For everyone else, it's bullshit. Especially young people are extremely fucked by it.

SpicyLemonZest 6y ago

The consumer price index is an average over an economy with a bunch of heterogenous goods, and a bunch of people who care different amounts about different subsets of them. I tend to agree that cheap housing is more important than cheap spaghetti or cheap iPhones, but that doesn't mean the CPI is wrong; it's just measuring something different than the details of what an optimal household budget ought to look like.

harryh 6y ago

If you believe that inflation is actually much higher than is generally believed by the public/markets you shouldn't care so much about mortgage payments > 10 years from now on a loan with fixed payments. The huge inflation you expect will mean the real cost of these payments dwindle in size so they will matter very little to you.

paganel 6y ago
The issue is of course that the salaries/wages don't get raised as much as the other costs mentioned by the OP (housing, among others, I'd add education), they haven't done so for quite a long time now. In order to be able to have "real cost of payments" going down because of inflation you'll still need some down-payment or some basic proof that you'll be able to pay back the loan you're about to get, and those stagnating wages often times are not enough for that.
- harryh 6y ago
  When a subset of goods are rising in price at a faster rate than other goods you aren't really talking about inflation anymore. You're talking about something else. It's pretty important to recognize the distinction.
  - paganel 6y ago
    > subset of goods are rising in price This is not a random subset of goods, we're talking about basic things like housing (as also mentioned by someone above) and education. It's not like the diamonds or the yacht markets have gone through the roof while everything else has remained pretty much stable, we're talking about stuff that affects almost everyone in their day-to-day life.
    - harryh 6y ago
      I'm not saying that these price increases don't matter. I'm saying that they aren't caused by inflation and that recognizing the distinction is important.
      - turbinerneiter 6y ago
        I think that depends on how you use the word inflation. Some posts up someone defined it in eco science terms. Some people define it via the consumer price index. The consumer price index is what governments and and companies use in salary negotiations. So for people, the consumer price index is what drives their salary. If this consumer price index is not adequately factoring in the price of houses (cost of housing) or stocks (price of saving for retirement), than they are skewed. Salaries will trail behind rising cost aka. my generation is basing social status on smartphones instead of houses, because we can't afford houses. Now, low interest rates play an important counter role: it is cheaper to finance a house. It due to the increased prices, it takes a lot longer. Combine that with the fact that my generation deals with less worker rights and job safety (they call it flexibility) and the fact that I have now seen two once in a lifetime economic crisis within 12 years ... It's getting quite hard to sign that 40 year finance plan. There is however a solution to this, which is to leave the cities and move to the countryside, where I can build a house on a plot of land that used to be part of my grandma's farm. Not everybody is that lucky tough and not everybody can a find a job there or work remote. Hell, I'm not sure if I can, given that the internet there is still copper based. In my opinion the issue is that to much money goes into buying existing things and to little money goes into creating new things. QE and other gov. measures seem to be going mostly into propping up prices of existing values, so the ones who own them don't lose virtual money.

defertoreptar 6y ago

Median sale price of houses sold has increased 2% from November 2019 to November 2020. https://fred.stlouisfed.org/series/MSPNHSUS https://fred.stlouisfed.org/series/MSPNHSUS That's on par with historical annualized inflation rates.

fakedang 6y ago
Your median sale price index compares house prices in some random Southern hell hole in Mississippi to a disaster ravaged area of Puerto Rico with NY and SF or Atlanta and Austin house prices. Places where people can actually go to work.
- okaram 6y ago
  I think this is the median house price ... sort all the prices for houses sold in the USA in a year, pick the one in the middle, so ...
  - fakedang 6y ago
    The middle can shift to the right easily if you exclude houses in some random houses in the middle of nowhere, while retaining exclusive country neighborhoods that people still move to and commute to and from for work.
- defertoreptar 6y ago
  The nice thing about the median is that it's robust against outliers like the ones you've mentioned. It's over $300k, so we're definitely not talking about some hellhole in MS.
  - fakedang 6y ago
    How about median house prices in all major employment zones in the US? I'm sure that would filter out all the small places in the country while also including places in the country used by the old money Brahmans. In either case, you still can't compare house prices in Albany to house prices in NY, which these median measures happen to weight in, even if slightly. Exclude a thousand such places and the median shifts to the right.

throw0101a 6y ago

> House prices doubled and the consumer price index shows low inflation for the same period. And? In Canada, the CPI has Shelter as 27%, with Owned accommodation being 17%: * https://www150.statcan.gc.ca/n1/pub/71-607-x/2018016/cpi-ipc-eng.htm https://www150.statcan.gc.ca/n1/pub/71-607-x/2018016/cpi-ipc... What's the component breakdown for the US CPI? Just because prices for some things are up does not mean prices for all or even most things are. And even though prices are up, mortgage rates are down, which may result in a net-zero change to affordability (i.e., your monthly carrying costs end up being the same). Heck, some Danish mortgage rates went negative in 2019: * https://www.theguardian.com/money/2019/aug/13/danish-bank-launches-worlds-first-negative-interest-rate-mortgage https://www.theguardian.com/money/2019/aug/13/danish-bank-la...

BLanen 6y ago

CPI is mostly for boomers that already have their house ownership secured. For everyone else, it's bullshit. Especially young people are extremely fucked by it.