3 ms·

> why that methodology is incorrect A lot of people take issue with hedonic adjustments, substitution threshold, etc - but the specific methdology used is far

by caeril 5y ago

> why that methodology is incorrect A lot of people take issue with hedonic adjustments, substitution threshold, etc - but the specific methdology used is far less important than the fact that they're simply lying about the data. For one example, the obvious elephant in the room is the shelter category. In the last year, rents are up 12%[1], and home prices have soared nearly 20%[2] Yet, from your own source, the BLS is claiming 3.2% for the shelter category. It's not so much that the methodology is wrong (although that argument could be made as well), but that they're flat out lying. And then you have to contend with the Gell-Mann amnesia effect: if they're lying to your face about the shelter category, what makes you think the data in any of the other categories, for which you have less third party data to corroborate, are not also completely fabricated? [1] https://www.apartmentlist.com/research/national-rent-data https://www.apartmentlist.com/research/national-rent-data [2] https://fred.stlouisfed.org/series/CSUSHPISA https://fred.stlouisfed.org/series/CSUSHPISA

AlexandrB 5y ago
> and home prices have soared nearly 20% I wonder if they're able to discount this because the low interest rates mean that monthly payments have not increased 20% for most mortgage borrowers.
- caeril 5y ago
  If you're talking YoY numbers, which we are, this would actually work against home buyers because rates are higher now than they were a year ago.
long_time_gone 5y ago
==For one example, the obvious elephant in the room is the shelter category. In the last year, rents are up 12%[1], and home prices have soared nearly 20%[2]== The median person does not see a 20% increase in housing prices if they are not currently purchasing a home. I have a 30-year mortgage and my housing costs have not increased since I purchased it. Add in the 65% home ownership rate and it isn't out of question that a large portion of the country isn't seeing as much housing inflation in their actual budgets.
gizmo686 5y ago
Home prices are not included in the shelter category. Homeowners are considered to be paying an implicit rent as their cost of shelter, which is based on the market rate of a comparable rental. Your source for rentals looks at the cost of new leases. The BLS methodology looks at the most recent rent of a sample of units, regardless of when the rent was set. We would expect your source to report a higher increase, because its methodology is more responsive to short term changes. That does not show that the BLS is lying.
notJim 5y ago
You've got some big misunderstandings here. 1) The rent data you cite is for new leases. Since new leases only represent a fraction of total leases, they aren't going to agree with tracking overall rent. 2) When you buy a house, you get two things: shelter and an investment asset. The inflation statistics are only interested in shelter, not investments, so they disaggregate them. They do this by computing the rent for an equivalent dwelling. For this reason, the home price index won't agree with the inflation statistics either.
- caeril 5y ago
  ok. > 1) The rent data you cite is for new leases. Since new leases only represent a fraction of total leases The vast, vast plurality of residential leases are for 12 months - and the vast majority are for 6, 12, or 18 months. So no, you're flat out wrong, here. We're talking YoY numbers, so these values reset literally at the end of the timeframe we're discussing. > 2) When you buy a house, you get two things: shelter and an investment asset. Cool. Home ownership is at a multi-generational LOW in the United States, with a huge proportion of the HN demographic comprising those currently priced completely out of this market. The OER metric weighting is not updated frequently enough to sufficiently account for this fact. The reality is that between shelter, fuel, and food, our cost of living is skyrocketing on the order of 12% per year, and the CPI understates this for obvious political reasons. The real yield on a 10y treasury is about -10%, so it's no wonder that obvious scams like AMC, JPEG NFTs, and Shiba Inu (the coin, not the breed) are so popular. You reach for yield any place you can.

by caeril 5y ago

AlexandrB 5y ago

> and home prices have soared nearly 20% I wonder if they're able to discount this because the low interest rates mean that monthly payments have not increased 20% for most mortgage borrowers.

caeril 5y ago
If you're talking YoY numbers, which we are, this would actually work against home buyers because rates are higher now than they were a year ago.

long_time_gone 5y ago

==For one example, the obvious elephant in the room is the shelter category. In the last year, rents are up 12%[1], and home prices have soared nearly 20%[2]== The median person does not see a 20% increase in housing prices if they are not currently purchasing a home. I have a 30-year mortgage and my housing costs have not increased since I purchased it. Add in the 65% home ownership rate and it isn't out of question that a large portion of the country isn't seeing as much housing inflation in their actual budgets.

gizmo686 5y ago

Home prices are not included in the shelter category. Homeowners are considered to be paying an implicit rent as their cost of shelter, which is based on the market rate of a comparable rental. Your source for rentals looks at the cost of new leases. The BLS methodology looks at the most recent rent of a sample of units, regardless of when the rent was set. We would expect your source to report a higher increase, because its methodology is more responsive to short term changes. That does not show that the BLS is lying.

notJim 5y ago

You've got some big misunderstandings here. 1) The rent data you cite is for new leases. Since new leases only represent a fraction of total leases, they aren't going to agree with tracking overall rent. 2) When you buy a house, you get two things: shelter and an investment asset. The inflation statistics are only interested in shelter, not investments, so they disaggregate them. They do this by computing the rent for an equivalent dwelling. For this reason, the home price index won't agree with the inflation statistics either.

caeril 5y ago
ok. > 1) The rent data you cite is for new leases. Since new leases only represent a fraction of total leases The vast, vast plurality of residential leases are for 12 months - and the vast majority are for 6, 12, or 18 months. So no, you're flat out wrong, here. We're talking YoY numbers, so these values reset literally at the end of the timeframe we're discussing. > 2) When you buy a house, you get two things: shelter and an investment asset. Cool. Home ownership is at a multi-generational LOW in the United States, with a huge proportion of the HN demographic comprising those currently priced completely out of this market. The OER metric weighting is not updated frequently enough to sufficiently account for this fact. The reality is that between shelter, fuel, and food, our cost of living is skyrocketing on the order of 12% per year, and the CPI understates this for obvious political reasons. The real yield on a 10y treasury is about -10%, so it's no wonder that obvious scams like AMC, JPEG NFTs, and Shiba Inu (the coin, not the breed) are so popular. You reach for yield any place you can.