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No, it really isn’t. From your link: “If someone were to rent you home today, how much do you think it would rent for monthly[...]” That’s a very poor proxy f
by zbzbBn 6y ago
No, it really isn’t. From your link:
“If someone were to rent you home today, how much do you think it would rent for monthly[...]”
That’s a very poor proxy for housing cost.
First of all it’s a guess. A guess from whom? What do these oracles know about how much their home can rent for if they haven’t put it up?
Second, the homes available in the rental market are vastly inferior from (for example) my home. I cannot find a home remotely as nice as my home (bought in 2017 for 320k, currently valued for 400k - pretty average middle class home in my city) but I can’t rent mine for what I’d want to rent it for [1] - so the supply and demand price don’t overlap for my type of home in my city. Without overlap of price, the question, as it pertains to my home is meaningless.
On the other hand, there is an easy way to include housing price for owners. Add price of homes to the CPI. In fact, investments generally should be included, since they are goods whose price raise with the increase in monetary mass
[1] is the accelerated deterioration of my home, and the headache of being a landlord worth the $1400/month renting it to a family? No.
Can I rent it for $1800 by splitting it into rooms, say, for students? $1800/month is not worth having destructive students live here.
- harryh 6y agoIt's certainly true that calculating imputed rent can be tricky and is probably subject to some error. However that does not make is meaningless.
- zbzbBn 6y agoOk, let’s say not meaningless. Let’s say it has (my guess of my particular case) a 30% error. What happens to CPI if the weighted average of housing is off by 30%? Assuming housing is a third of CPI, that puts CPI up to 10%. Look, I’m actually looking to buy a home out in the country and remote work from there. I’m actually living the problem of “should I sell my home or rent it out?” It’s not a survey question, that’s for sure!
- gruez 6y agoIt's less of a problem than you think because the error can't compound. An error of 30% compounded over 10 years can't grow to a 1300% because if you compare the two years directly you'll see there's a huge mismatch.
- DoubleDerper 6y ago“If someone were to rent you home today, how much do you think it would rent for monthly[...]' That’s a very poor proxy for housing cost." Agreed. Rental data is publicly available. Why bother asking only to get a worse answer?
- deleted 6y ago[deleted]
- zbzbBn 6y agoI was quoting the question asked in the government document posted by the OP
- em500 6y agoThe question is asked to owners. Renters are asked how much they actually paid in rent. The main reason why owners are asked for their estimate is because owner-occupied houses can be systematically different (probably more expensive/higher class) than renter-occpied houses, so estimating owner-occupoed rents with actual rents can be biased.