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And notably the 40% number has not changed since 1990, as [0] shows. But it's misleading. As the OP showed, median housing prices is determined by the amount t

And notably the 40% number has not changed since 1990, as [0] shows. But it's misleading. As the OP showed, median housing prices is determined by the amount the median income can afford a house based on the interest rates. This means that to the CPI, a $500k house is equivalent to a $210k house was in 1990 as they both have the same payment. They will therefore have the same owner equivalent rents. And therefore even if prices have more than doubled in 30 years, the CPI will not show it. And so we can reframe the argument from above as: When the government calculates inflation, they look at prices of common goods, but not housing. Housing is based on monthly payment. That's why inflation is artificially low. [0] https://www.bls.gov/cpi/tables/relative-importance/1990.txt https://www.bls.gov/cpi/tables/relative-importance/1990.txt

em500 6y ago
> When the government calculates inflation, they look at prices of common goods, but not housing. Housing is based on monthly payment. That's why inflation is artificially low. Please read how the shelter part of CPI is actually calculated, rather than using your imagination. The rental component of shelter is based on surveying renters how much rent they actually pay. Owner equivalent rents (OER) components is based on surveying owners how much rent they think their house would rent for. It's simply answering the question "If someone were to rent your home today, how much do you think it would rent for monthly?". There are no house prices, no interests rates, no house payments in there at all; they only affect CPI as far as it unfluences house owner estimates of rents. The OER component of CPI would be "artificially low" if you believe owners systematically understate how much their own house would rent for (or if you believe the BLS folks are lying). Your $500k house would be equivalent to the $210k 1990 house in the CPI calculation if its owner believes it would rent for the same amount today as in 1990.

em500 6y ago

> When the government calculates inflation, they look at prices of common goods, but not housing. Housing is based on monthly payment. That's why inflation is artificially low. Please read how the shelter part of CPI is actually calculated, rather than using your imagination. The rental component of shelter is based on surveying renters how much rent they actually pay. Owner equivalent rents (OER) components is based on surveying owners how much rent they think their house would rent for. It's simply answering the question "If someone were to rent your home today, how much do you think it would rent for monthly?". There are no house prices, no interests rates, no house payments in there at all; they only affect CPI as far as it unfluences house owner estimates of rents. The OER component of CPI would be "artificially low" if you believe owners systematically understate how much their own house would rent for (or if you believe the BLS folks are lying). Your $500k house would be equivalent to the $210k 1990 house in the CPI calculation if its owner believes it would rent for the same amount today as in 1990.