4 ms·

I feel like all these numbers are bogus. Housing? Seeing as it's nearly half of people's spending, I feel it should be weighted appropriately. And if so, rea

by axaxs 5y ago

I feel like all these numbers are bogus. Housing? Seeing as it's nearly half of people's spending, I feel it should be weighted appropriately. And if so, real prices would be closer to 20% inflated in most markets YOY.

spaetzleesser 5y ago
Add education and health care to this and you get some pretty serious numbers.
staticman2 5y ago
Half of people certainly are not buying houses in any year.
- woodruffw 5y ago
  "Half of peoples' spending" presumably means "roughly half of individual post-tax income goes into housing costs," not "roughly half of individuals buy a new home each year." I don't know whether that number is true or not, but it doesn't seem implausible given mortgages and rent.
- archon 5y ago
  At least half of people are involved in the housing market, not just immediate buyers. Because you’d better believe if residential property prices skyrocket, so will rental rates.
  - staticman2 5y ago
    My point is when you own a house your expenses don't skyrocket because your neighbor sold a house for a 30% higher price this year than your other neighbor last year. Houses may or may not be half of people's spending like the poster above claimed, but homeowners generally do not see prices inflate when a small portion of their neighbors buy or sell homes. So whether or not housing is 50 percent of people's expenses that doesn't mean 50 percent of expenses have been subject to inflation.
    - lotsofpulp 5y ago
      I think archon is referring to the fact that, in the US, there are 82M owner occupied homes, and 42M renter occupied homes, and so adding up total number of people looking to purchase a house plus those affected by (presumed) changes in rental prices due to changed in land prices, you might come to the conclusion that “half of the people are involved in housing market”. I do not know if I agree with that reasoning, but I would say that if you are looking to purchase a new home at some point in your life (even if you already have one), or you have kids or family that is looking to purchase a home, it is very possible that you are affected by your neighbors’ buying and selling in the event that it causes you to start saving more to meet the goal of purchasing a new home. And I think a large share, maybe a majority of Americans fall into this category. For example, if I am in a “starter home” and had a goal of upgrading to a bigger home to accommodate growing family, and that bigger home goes from $450k to $750k over the course of 5 years, then that $300k increase is surely felt and dwarfs the effects of any other changes in price in a typical family’s budget. Best case scenario is you live nearby and your starter home has increased from $300k to $400k, but the price increases in lower end homes will never make up for price increases in higher end homes.
      - staticman2 5y ago
        64.3 percent of Americans are homeowners. The median duration of homeownership is 13 years. So we can conclude that 5 percent of Americans might be effected by house sale in a given year, and some might be downgrading a home or moving to a cheaper location.
skrowl 5y ago
Housing, building materials, food, even used cars are all up WAY more than 5% vs this time last year.
- ghaff 5y ago
  Actually used cars and trucks are apparently a particularly big spike, almost 30% in the chart in The New York Times. (New vehicles are only about 3%.) Almost as big, and completely unsurprising, is airfares. I recently booked a flight for late September and it was very pricey.
lumost 5y ago
Housing is tricky because most individuals do not pay the marginal rate. There are many individuals who last bought a house decades ago, are locked into rent-control, or have fortunate landlords who don't push the rent to the marginal rate. Unfortunately this means that if housing is inflating it punishes the portion of the population susceptible to the marginal rates which in the long-run will be everyone. It would be great if there was a "marginal" CPI which highlighted the changing prices of capital assets.
- deleted 5y ago
  [deleted]
xur17 5y ago
Looking at the cpi doc [0], shelter makes up 32.86% of the expenditures, which at least at first glance appears realistic. There will obviously be outliers (people living in higher cost of living areas, cities, etc), but I'm curious if you see data that supports a different number. I'd expect anecdotal numbers from hn to trend towards higher CoL, which likely correlates with spending a higher percentage on housing. [0] https://www.bls.gov/news.release/pdf/cpi.pdf https://www.bls.gov/news.release/pdf/cpi.pdf
baron_harkonnen 5y ago
Housing is also tricky to really account for correctly. One of the reasons house prices are skyrocketing is people are leaving cities in droves, moving everywhere from near suburbs to places like rural Vermont. One of the main reasons people are doing this is they're realizing the dramatic cost differential between living in the city in a tiny apartment and living in a much larger space outside the city or in a smaller city. This means many people can pay 20-50% over asking, but still end up paying less per month and having more space. This is in fact part of the reason people are willing to bid so much over asking. It's not because they're desperate, at least for my anecdotes, but because you can bid very aggressively and still pay substantially less than you would for an apartment. On top of all that, rental costs in most cities are plummeting. Despite the bizarre housing market right now, I wouldn't be surprised if on average most people were spending less on monthly payments.
- helen___keller 5y ago
  > Despite the bizarre housing market right now, I wouldn't be surprised if on average most people were spending less on monthly payments. To add a supporting anecdote from my recently finished adventure in house hunting, condos in desirable HCOL areas are also on fire but the demand actually dries up at a certain price point - around 1.3-1.4MM where I live. The most expensive downtown areas (where condos regularly go 2MM or higher) seem to have a massive glut of units and sometimes entire buildings on sale. Personally, I bought a 1MM condo that was originally priced at 1.2MM and had a price decrease. It's not particularly cheap by any means, but it's not significantly more than I would have been paying in 2019, I don't think. edit: A fun way to see this yourself is to use a search on redfin for "price reduced in 14 days" and see which neighborhoods / price points show up in your city. Where I live, it's the pricy condos. Single families still sell at almost any price point, and more affordable condos sell as well.
- axaxs 5y ago
  Small correction: Rental prices in a few, big cities are falling. On the whole, in most cities, rental prices are through the roof. Almost exactly 20% higher for a SFH rental YOY. I know because I checked what the house I moved out of was relisted for.
adflux 5y ago
Its only the most expensive thing in most people's lives that has doubled in cost in about 10 years... 10 years i'd be able to afford a 150m2 house with my salary. Now a 75m2 house costs the same. Yes, I can sell the house for more money afterwards, but the inflation is still there, people are getting less whilst paying more. This is an especially rough deal for non-homeowners who want to enter the market, because they have not profited of the apprecation in the past decade. Its by far the most expensive purchase in peoples lives, vital to our needs just like food and water... And I really dont agree with not tracking it in CPI.
- gajjanag 5y ago
  > Its by far the most expensive purchase in peoples lives, vital to our needs just like food and water... And I really dont agree with not tracking it in CPI. Please stop spreading this false information. CPI absolutely does track housing: https://www.bls.gov/cpi/factsheets/owners-equivalent-rent-and-rent.pdf https://www.bls.gov/cpi/factsheets/owners-equivalent-rent-an... Now, you might disagree with the methodology used above, in which case it is healthy to discuss alternatives, or where CPI housing calculation has issues.
  - adflux 5y ago
    Rent is not purchasing a house. As the document you linked clearly states in the FAQ
    - anotherman554 5y ago
      If you were aware that rent was covered by CPI I wonder why you wrote "Its by far the most expensive purchase in peoples lives, vital to our needs just like food and water... And I really dont agree with not tracking it in CPI." Either you didn't know rent was included in CPI or you are making the very odd claim that homeownership is like food or water, implying you'll drop dead if you rent a home rather than buying one.
bombcar 5y ago
The problem with tracking housing is that you end up with an index that may not reflect what people "feel". If you own your house and aren't intending to sell, and house prices double but food and energy is down, you will feel things are cheaper even if the index shows it rising. And in the case your house value halves but food and energy double, you'll feel things are more expensive even though the index shows it falling. The indices are important, but people often misapply them.

by axaxs 5y ago

spaetzleesser 5y ago

Add education and health care to this and you get some pretty serious numbers.

staticman2 5y ago

Half of people certainly are not buying houses in any year.

woodruffw 5y ago
"Half of peoples' spending" presumably means "roughly half of individual post-tax income goes into housing costs," not "roughly half of individuals buy a new home each year." I don't know whether that number is true or not, but it doesn't seem implausible given mortgages and rent.
archon 5y ago
At least half of people are involved in the housing market, not just immediate buyers. Because you’d better believe if residential property prices skyrocket, so will rental rates.
- staticman2 5y ago
  My point is when you own a house your expenses don't skyrocket because your neighbor sold a house for a 30% higher price this year than your other neighbor last year. Houses may or may not be half of people's spending like the poster above claimed, but homeowners generally do not see prices inflate when a small portion of their neighbors buy or sell homes. So whether or not housing is 50 percent of people's expenses that doesn't mean 50 percent of expenses have been subject to inflation.
  - lotsofpulp 5y ago
    I think archon is referring to the fact that, in the US, there are 82M owner occupied homes, and 42M renter occupied homes, and so adding up total number of people looking to purchase a house plus those affected by (presumed) changes in rental prices due to changed in land prices, you might come to the conclusion that “half of the people are involved in housing market”. I do not know if I agree with that reasoning, but I would say that if you are looking to purchase a new home at some point in your life (even if you already have one), or you have kids or family that is looking to purchase a home, it is very possible that you are affected by your neighbors’ buying and selling in the event that it causes you to start saving more to meet the goal of purchasing a new home. And I think a large share, maybe a majority of Americans fall into this category. For example, if I am in a “starter home” and had a goal of upgrading to a bigger home to accommodate growing family, and that bigger home goes from $450k to $750k over the course of 5 years, then that $300k increase is surely felt and dwarfs the effects of any other changes in price in a typical family’s budget. Best case scenario is you live nearby and your starter home has increased from $300k to $400k, but the price increases in lower end homes will never make up for price increases in higher end homes.
    - staticman2 5y ago
      64.3 percent of Americans are homeowners. The median duration of homeownership is 13 years. So we can conclude that 5 percent of Americans might be effected by house sale in a given year, and some might be downgrading a home or moving to a cheaper location.

skrowl 5y ago

Housing, building materials, food, even used cars are all up WAY more than 5% vs this time last year.

ghaff 5y ago
Actually used cars and trucks are apparently a particularly big spike, almost 30% in the chart in The New York Times. (New vehicles are only about 3%.) Almost as big, and completely unsurprising, is airfares. I recently booked a flight for late September and it was very pricey.

lumost 5y ago

Housing is tricky because most individuals do not pay the marginal rate. There are many individuals who last bought a house decades ago, are locked into rent-control, or have fortunate landlords who don't push the rent to the marginal rate. Unfortunately this means that if housing is inflating it punishes the portion of the population susceptible to the marginal rates which in the long-run will be everyone. It would be great if there was a "marginal" CPI which highlighted the changing prices of capital assets.

deleted 5y ago
[deleted]

xur17 5y ago

Looking at the cpi doc [0], shelter makes up 32.86% of the expenditures, which at least at first glance appears realistic. There will obviously be outliers (people living in higher cost of living areas, cities, etc), but I'm curious if you see data that supports a different number. I'd expect anecdotal numbers from hn to trend towards higher CoL, which likely correlates with spending a higher percentage on housing. [0] https://www.bls.gov/news.release/pdf/cpi.pdf https://www.bls.gov/news.release/pdf/cpi.pdf

baron_harkonnen 5y ago

Housing is also tricky to really account for correctly. One of the reasons house prices are skyrocketing is people are leaving cities in droves, moving everywhere from near suburbs to places like rural Vermont. One of the main reasons people are doing this is they're realizing the dramatic cost differential between living in the city in a tiny apartment and living in a much larger space outside the city or in a smaller city. This means many people can pay 20-50% over asking, but still end up paying less per month and having more space. This is in fact part of the reason people are willing to bid so much over asking. It's not because they're desperate, at least for my anecdotes, but because you can bid very aggressively and still pay substantially less than you would for an apartment. On top of all that, rental costs in most cities are plummeting. Despite the bizarre housing market right now, I wouldn't be surprised if on average most people were spending less on monthly payments.

helen___keller 5y ago
> Despite the bizarre housing market right now, I wouldn't be surprised if on average most people were spending less on monthly payments. To add a supporting anecdote from my recently finished adventure in house hunting, condos in desirable HCOL areas are also on fire but the demand actually dries up at a certain price point - around 1.3-1.4MM where I live. The most expensive downtown areas (where condos regularly go 2MM or higher) seem to have a massive glut of units and sometimes entire buildings on sale. Personally, I bought a 1MM condo that was originally priced at 1.2MM and had a price decrease. It's not particularly cheap by any means, but it's not significantly more than I would have been paying in 2019, I don't think. edit: A fun way to see this yourself is to use a search on redfin for "price reduced in 14 days" and see which neighborhoods / price points show up in your city. Where I live, it's the pricy condos. Single families still sell at almost any price point, and more affordable condos sell as well.
axaxs 5y ago
Small correction: Rental prices in a few, big cities are falling. On the whole, in most cities, rental prices are through the roof. Almost exactly 20% higher for a SFH rental YOY. I know because I checked what the house I moved out of was relisted for.

adflux 5y ago

Its only the most expensive thing in most people's lives that has doubled in cost in about 10 years... 10 years i'd be able to afford a 150m2 house with my salary. Now a 75m2 house costs the same. Yes, I can sell the house for more money afterwards, but the inflation is still there, people are getting less whilst paying more. This is an especially rough deal for non-homeowners who want to enter the market, because they have not profited of the apprecation in the past decade. Its by far the most expensive purchase in peoples lives, vital to our needs just like food and water... And I really dont agree with not tracking it in CPI.

gajjanag 5y ago
> Its by far the most expensive purchase in peoples lives, vital to our needs just like food and water... And I really dont agree with not tracking it in CPI. Please stop spreading this false information. CPI absolutely does track housing: https://www.bls.gov/cpi/factsheets/owners-equivalent-rent-and-rent.pdf https://www.bls.gov/cpi/factsheets/owners-equivalent-rent-an... Now, you might disagree with the methodology used above, in which case it is healthy to discuss alternatives, or where CPI housing calculation has issues.
- adflux 5y ago
  Rent is not purchasing a house. As the document you linked clearly states in the FAQ
  - anotherman554 5y ago
    If you were aware that rent was covered by CPI I wonder why you wrote "Its by far the most expensive purchase in peoples lives, vital to our needs just like food and water... And I really dont agree with not tracking it in CPI." Either you didn't know rent was included in CPI or you are making the very odd claim that homeownership is like food or water, implying you'll drop dead if you rent a home rather than buying one.

bombcar 5y ago

The problem with tracking housing is that you end up with an index that may not reflect what people "feel". If you own your house and aren't intending to sell, and house prices double but food and energy is down, you will feel things are cheaper even if the index shows it rising. And in the case your house value halves but food and energy double, you'll feel things are more expensive even though the index shows it falling. The indices are important, but people often misapply them.