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This is a great point. But a counterpoint is that housing is not included in consumer price index. Real estate prices have rocketed to outer space for the past

This is a great point. But a counterpoint is that housing is not included in consumer price index. Real estate prices have rocketed to outer space for the past year and housing constitutes the biggest monthly expense for most people. Not predicting disaster, but what's going on is very unusual and no one can predict how or when it will shake out.

donkeyd 5y ago
> Real estate prices have rocketed to outer space for the past year In the Netherlands it's about 20% YoY. And this is starting to become true all throughout the country even though it started in urban areas. I really feel bad for people who aren't homeowners yet, because becoming one right now is getting damn near impossible.
- kipchak 5y ago
  I fall into that category, and am still mildly hopeful there might be one or two more chances to hop on board. My rent increased by close to 20% this year (US, FL) to the point where paying my old rent with a $250 month to month penalty is actually cheaper. I think this is part of the rampant speculation on crypto and the like - $1,000 isn't really going to do me that much good, but if I hit a 100x I could be a homeowner.
  - lotsofpulp 5y ago
    > My rent increased by close to 20% this year (US, FL) to the point where paying my old rent with a $250 month to month penalty is actually cheaper. I have never heard of this type of rental agreement. Your contract says you can stay indefinitely if you pay $250 per month extra over the expired contract’s rent?
    - kipchak 5y ago
      The lease automatically converted to a month to month after the one year term ended. This thread seems to cover a similar scenario.[1] I suppose the downside is they could give me the boot with 30 days notice. FWIW I've contacted them several times to try and just sign a lease but the property has been bought out and had it's management office staff swapped out a few times so the whole thing is a mess. [1]https://www.city-data.com/forum/renting/1261828-fixed-term-lease-converted-month-month.html https://www.city-data.com/forum/renting/1261828-fixed-term-l...
- 01100011 5y ago
  I don't know how the 'average joe' is tolerating it right now. I rent, but I also work in tech so there's still a chance I'll be able to buy a house one day(not anywhere near my job, but still). If I were middle class and saving for a home, I think I would be angry to the point of revolution and violence right now. There are people who have worked like crazy their whole lives and they just had their hopes and dreams set on fire by runaway money creation and the resulting inflation.
  - vkou 5y ago
    > There are people who have worked like crazy their whole lives and they just had their hopes and dreams set on fire by runaway money creation and the resulting inflation. Would they be happier under a repeat of 2008 or 1928 instead?
    - kipchak 5y ago
      I would figure from a self interested perspective a repeat of 2008 would be pretty advantageous to an aspiring homeowner. Home prices peaked at $262,600 median in March 2007 and bottomed at $205,100 in March of 2009.[1] Rates were even about a % lower in 2009.[2][3] Of course if the hypothetical aspiring homeowner with excellent market timing lost their job the point would be moot, but if their income stayed the same and they put 20,000 down their monthly payments would have gone from $1,302 to $994. [1]http://www.fedprimerate.com/new_home_sales_price_history.htm http://www.fedprimerate.com/new_home_sales_price_history.htm [2]https://www.fhfa.gov/Media/PublicAffairs/Pages/FHFA-Reports-Mortgage-Interest-Rates-March-2009.aspx https://www.fhfa.gov/Media/PublicAffairs/Pages/FHFA-Reports-... [3]https://www.marketwatch.com/story/us-mortgage-rates-hit-2007-lows https://www.marketwatch.com/story/us-mortgage-rates-hit-2007...
      - vkou 5y ago
        Is it pretty advantageous to new retiree who has followed orthodox investment advice, and has started to live off their investments, only to see the value of half of them crash? Even if they recover in six years, they have still lost a mountain of principal in the meantime. Is it advantageous to a new graduate who will see no work, and maybe a decade of depressed wages (which, between loans and compounding interest in savings, is devastating to their future prospects)? Is it advantageous to a new homeowner that just lost their job? Some people got burnt by that flood of money that stabilized the economy. Some people benefited. Some people avoided harm. Focusing on the first group without regard for the latter is missing a large part of the picture - which was that the economy as a whole remained more or less stable through this crisis.
_delirium 5y ago
CPI does include housing, weighted at 32% in the CPI-U [1]. [1] https://www.bls.gov/news.release/pdf/cpi.pdf https://www.bls.gov/news.release/pdf/cpi.pdf, Table 1
- adam_arthur 5y ago
  And the CPI figure is severely lagging public rent data https://www.apartmentlist.com/research/national-rent-data https://www.apartmentlist.com/research/national-rent-data OER is a hugely flawed metric that is somewhat designed to suppress true cost increases. E.g. they include rent controlled units in the figure. Small portion, but clearly that's not a useful lens to analyze through. Many other methodological flaws that can be enumerated
  - _delirium 5y ago
    If I'm reading apartmentlist's methodology correctly, they're tracking average prices for apartments that were vacant and have newly been rented (what they call "transacted rent prices"). But they don't track prices for existing leases to long-term tenants, which are typically much more stable than newly turned over units. Depending on the market, that can significantly overestimate rent increases in the broader market. For example, in NYC, about 50% of renters are in rent-controlled units, but they account for a relatively small percentage of new listings, because the units don't turn over often. So you'd get different answers if you average rent for newly turned over units vs. average rent for all current tenants. (I'm not in NYC, but also in that category: I've rented my place for years, and my rent has increased 0.0% this year.)
    - adam_arthur 5y ago
      Yes, exactly. Why would you ever want to weight in rent controlled units? The much more useful number is, what is the cost of living for somebody plopped into the economy. Because eventually almost everybody ends up moving and bearing that cost. Should our price data be forward looking or backwards looking? Obviously from a policy perspective having forward looking pricing data is much more useful and relevant. Including rent controlled units and existing leases is a methodological flaw of OER. You're right though, if you game the measurement and design the methodology just right, you can produce lower numbers. If the CPI formula were unchanged from the 70s, we would have roughly equivalent inflation numbers now that we had then.
xapata 5y ago
CPI doesn't include the stock market, either. Real estate is an asset. Rent is included, however. They estimate how much a home owner is effectively paying in rent.

donkeyd 5y ago

> Real estate prices have rocketed to outer space for the past year In the Netherlands it's about 20% YoY. And this is starting to become true all throughout the country even though it started in urban areas. I really feel bad for people who aren't homeowners yet, because becoming one right now is getting damn near impossible.

kipchak 5y ago
I fall into that category, and am still mildly hopeful there might be one or two more chances to hop on board. My rent increased by close to 20% this year (US, FL) to the point where paying my old rent with a $250 month to month penalty is actually cheaper. I think this is part of the rampant speculation on crypto and the like - $1,000 isn't really going to do me that much good, but if I hit a 100x I could be a homeowner.
- lotsofpulp 5y ago
  > My rent increased by close to 20% this year (US, FL) to the point where paying my old rent with a $250 month to month penalty is actually cheaper. I have never heard of this type of rental agreement. Your contract says you can stay indefinitely if you pay $250 per month extra over the expired contract’s rent?
  - kipchak 5y ago
    The lease automatically converted to a month to month after the one year term ended. This thread seems to cover a similar scenario.[1] I suppose the downside is they could give me the boot with 30 days notice. FWIW I've contacted them several times to try and just sign a lease but the property has been bought out and had it's management office staff swapped out a few times so the whole thing is a mess. [1]https://www.city-data.com/forum/renting/1261828-fixed-term-lease-converted-month-month.html https://www.city-data.com/forum/renting/1261828-fixed-term-l...
01100011 5y ago
I don't know how the 'average joe' is tolerating it right now. I rent, but I also work in tech so there's still a chance I'll be able to buy a house one day(not anywhere near my job, but still). If I were middle class and saving for a home, I think I would be angry to the point of revolution and violence right now. There are people who have worked like crazy their whole lives and they just had their hopes and dreams set on fire by runaway money creation and the resulting inflation.
- vkou 5y ago
  > There are people who have worked like crazy their whole lives and they just had their hopes and dreams set on fire by runaway money creation and the resulting inflation. Would they be happier under a repeat of 2008 or 1928 instead?
  - kipchak 5y ago
    I would figure from a self interested perspective a repeat of 2008 would be pretty advantageous to an aspiring homeowner. Home prices peaked at $262,600 median in March 2007 and bottomed at $205,100 in March of 2009.[1] Rates were even about a % lower in 2009.[2][3] Of course if the hypothetical aspiring homeowner with excellent market timing lost their job the point would be moot, but if their income stayed the same and they put 20,000 down their monthly payments would have gone from $1,302 to $994. [1]http://www.fedprimerate.com/new_home_sales_price_history.htm http://www.fedprimerate.com/new_home_sales_price_history.htm [2]https://www.fhfa.gov/Media/PublicAffairs/Pages/FHFA-Reports-Mortgage-Interest-Rates-March-2009.aspx https://www.fhfa.gov/Media/PublicAffairs/Pages/FHFA-Reports-... [3]https://www.marketwatch.com/story/us-mortgage-rates-hit-2007-lows https://www.marketwatch.com/story/us-mortgage-rates-hit-2007...
    - vkou 5y ago
      Is it pretty advantageous to new retiree who has followed orthodox investment advice, and has started to live off their investments, only to see the value of half of them crash? Even if they recover in six years, they have still lost a mountain of principal in the meantime. Is it advantageous to a new graduate who will see no work, and maybe a decade of depressed wages (which, between loans and compounding interest in savings, is devastating to their future prospects)? Is it advantageous to a new homeowner that just lost their job? Some people got burnt by that flood of money that stabilized the economy. Some people benefited. Some people avoided harm. Focusing on the first group without regard for the latter is missing a large part of the picture - which was that the economy as a whole remained more or less stable through this crisis.

_delirium 5y ago

CPI does include housing, weighted at 32% in the CPI-U [1]. [1] https://www.bls.gov/news.release/pdf/cpi.pdf https://www.bls.gov/news.release/pdf/cpi.pdf, Table 1

adam_arthur 5y ago
And the CPI figure is severely lagging public rent data https://www.apartmentlist.com/research/national-rent-data https://www.apartmentlist.com/research/national-rent-data OER is a hugely flawed metric that is somewhat designed to suppress true cost increases. E.g. they include rent controlled units in the figure. Small portion, but clearly that's not a useful lens to analyze through. Many other methodological flaws that can be enumerated
- _delirium 5y ago
  If I'm reading apartmentlist's methodology correctly, they're tracking average prices for apartments that were vacant and have newly been rented (what they call "transacted rent prices"). But they don't track prices for existing leases to long-term tenants, which are typically much more stable than newly turned over units. Depending on the market, that can significantly overestimate rent increases in the broader market. For example, in NYC, about 50% of renters are in rent-controlled units, but they account for a relatively small percentage of new listings, because the units don't turn over often. So you'd get different answers if you average rent for newly turned over units vs. average rent for all current tenants. (I'm not in NYC, but also in that category: I've rented my place for years, and my rent has increased 0.0% this year.)
  - adam_arthur 5y ago
    Yes, exactly. Why would you ever want to weight in rent controlled units? The much more useful number is, what is the cost of living for somebody plopped into the economy. Because eventually almost everybody ends up moving and bearing that cost. Should our price data be forward looking or backwards looking? Obviously from a policy perspective having forward looking pricing data is much more useful and relevant. Including rent controlled units and existing leases is a methodological flaw of OER. You're right though, if you game the measurement and design the methodology just right, you can produce lower numbers. If the CPI formula were unchanged from the 70s, we would have roughly equivalent inflation numbers now that we had then.

xapata 5y ago

CPI doesn't include the stock market, either. Real estate is an asset. Rent is included, however. They estimate how much a home owner is effectively paying in rent.