5 ms·

The CPI has been questionable for a very long time, especially since the price of real estate went insane in the 2000s.

• throw0101a 5y ago
  > especially since the price of real estate went insane in the 2000s. And the monthly cost of mortgages went down over the 2000s: * https://awealthofcommonsense.com/2021/03/what-if-housing-prices-arent-as-high-as-they-appear/ https://awealthofcommonsense.com/2021/03/what-if-housing-pri...
• nradov 5y ago
  The price of real estate isn't included in the CPI, nor should it be. Purchasing real estate is an investment, not a consumer expenditure. The CPI does include rent and owner's imputed rent.
  • api 5y ago
    > Purchasing real estate is an investment, not a consumer expenditure. Yeah I remember when I was living under a bridge and then decided to invest in Real Estate. Renters have a greatly impaired ability to build wealth. If everyone has to rent except "investors" then there is no more middle class. In a market that is majority renters landlords can raise rent until it consumes virtually all surplus: https://en.wikipedia.org/wiki/Law_of_rent https://en.wikipedia.org/wiki/Law_of_rent The CPI is correct as the CPI is defined, but that's circular. I can index inflation to the number of nose hairs in the President's nose if I want. The question is whether it's a meaningful statistic for driving a policy that benefits anyone except the government or the financial industry. The CPI should include the cost per square foot of residential real estate. It should also be weighted heavily toward necessities like food, energy, education, and health care, which perhaps coincidentally are hard to outsource and therefore are more directly influenced by domestic inflation.
    • nradov 5y ago
      Nonsense. That's like claiming the CPI should include the price of gold bars or mutual fund shares. You completely missed the point of the CPI. It has nothing to do with building wealth. CPI is heavily weighted toward necessities like food, energy, education, and health care. You would know that if you bothered to read the documentation. https://www.bls.gov/cpi/methods-overview.htm https://www.bls.gov/cpi/methods-overview.htm
    • mrep 5y ago
      > The CPI should include the cost per square foot of residential real estate. Other websites follow that [0] and interestingly enough, median inflation adjusted price per square foot across the entire country hasn't really budged in decades although covid could have messed that up these pasts 2 years. Of course, if you want to live in a geography constrained location like the west coast and northeast, that does not really help you but you need to work with their local governments as that is a local problem and not a federal one. [0]: https://www.supermoney.com/inflation-adjusted-home-prices/ https://www.supermoney.com/inflation-adjusted-home-prices/
    • gizmo686 5y ago
      If the purpose of buying real estate is to build wealth, then it is, by definition, an investment. If the purpose is to provide shelter, it is not. In practice, people buy houses both as an investment and a shelter. So the CPI attempts to ignore the portion of the purpose that functions as an investment.
    • notJim 5y ago
      > Renters have a greatly impaired ability to build wealth Really, in the era of fractional shares and low/no-cost brokerages? Renters can build wealth by purchasing assets, just like anyone else.