4 ms·

You are confusing "rent" and "imputed rent". The former is easy to calculate, and the BLM does calculate it accurately by simply asking a whole bunch of renters

by seoaeu 5y ago

You are confusing "rent" and "imputed rent". The former is easy to calculate, and the BLM does calculate it accurately by simply asking a whole bunch of renters how much they pay each month. But imputed rent is a more subtle and difficult number. The goal is to know what the market rent would be for all the homes not currently on the rental market. I'm sure you can find other sources on why this value should be included in the CPI calculation (in addition to rent), but once you recognize that, it should be clearer why the Zillow approach wouldn't work: Zillow and similar sites only know about what homes sell for, or rent for. Now could an expert come up with a model of what a home might rent for given sale price, number of sqft, bedrooms, etc.? Of course. But doing so very much isn't an afternoon project because the data is tricky: the owner occupied homes differ from rental units in important and hard to evaluate measure. For instance, apartments around my city are more poorly maintained than similarly aged ownership units.

missedthecue 5y ago
>The goal is to know what the market rent would be for all the homes not currently on the rental market I don't understand why this is necessary, or why asking someone who hasn't been on the housing market for 15 years what the value of their home is might be good data collection.
- seoaeu 5y ago
  I'll let someone else comment on the data collection part. But for why this is necessary, how else would you compute the housing costs of someone who purchased a home 15 years ago and hasn't moved since? That number is needed to compute the overall CPI, so you can't just skip it
  - missedthecue 5y ago
    Why can't you just skip it and calculate a median of all the nearby homes and rentals that have transacted on the market over the past x months? That seems more objective than asking people who have no idea what rent is what they'd rent their home for. I bet if you asked a panel of 1000 homeowners that haven't bought or rented in 10+ years what rent was going for in their cities, they'd undershoot it by 20% or more.
    - seoaeu 5y ago
      To quote the BLS [0] on why home prices are the wrong metric: > the CPI views housing units as capital (or investment) goods and not as consumption items. Spending to purchase and improve houses and other housing units is investment and not consumption. Shelter, the service the housing units provide, is the relevant consumption item for the CPI. The cost of shelter for renter-occupied housing is rent. For an owner-occupied unit, the cost of shelter is the implicit rent that owner occupants would have to pay if they were renting their homes. If I'm reading that fact sheet correctly, they actually don't ask homeowners at all. Rather they just ask a bunch of renters whet their monthly rent is (which the vast majority of them should be able to answer accurately) and then use fancy math to extrapolate what the nearby home ownership units would rent for. I'd suggest reading/skimming that whole fact sheet if you want more details, though the summary seems to be that they've actually put a bunch of thought into this stuff. [0]: https://www.bls.gov/cpi/factsheets/owners-equivalent-rent-and-rent.pdf https://www.bls.gov/cpi/factsheets/owners-equivalent-rent-an...

by seoaeu 5y ago

missedthecue 5y ago

>The goal is to know what the market rent would be for all the homes not currently on the rental market I don't understand why this is necessary, or why asking someone who hasn't been on the housing market for 15 years what the value of their home is might be good data collection.

seoaeu 5y ago
I'll let someone else comment on the data collection part. But for why this is necessary, how else would you compute the housing costs of someone who purchased a home 15 years ago and hasn't moved since? That number is needed to compute the overall CPI, so you can't just skip it
- missedthecue 5y ago
  Why can't you just skip it and calculate a median of all the nearby homes and rentals that have transacted on the market over the past x months? That seems more objective than asking people who have no idea what rent is what they'd rent their home for. I bet if you asked a panel of 1000 homeowners that haven't bought or rented in 10+ years what rent was going for in their cities, they'd undershoot it by 20% or more.
  - seoaeu 5y ago
    To quote the BLS [0] on why home prices are the wrong metric: > the CPI views housing units as capital (or investment) goods and not as consumption items. Spending to purchase and improve houses and other housing units is investment and not consumption. Shelter, the service the housing units provide, is the relevant consumption item for the CPI. The cost of shelter for renter-occupied housing is rent. For an owner-occupied unit, the cost of shelter is the implicit rent that owner occupants would have to pay if they were renting their homes. If I'm reading that fact sheet correctly, they actually don't ask homeowners at all. Rather they just ask a bunch of renters whet their monthly rent is (which the vast majority of them should be able to answer accurately) and then use fancy math to extrapolate what the nearby home ownership units would rent for. I'd suggest reading/skimming that whole fact sheet if you want more details, though the summary seems to be that they've actually put a bunch of thought into this stuff. [0]: https://www.bls.gov/cpi/factsheets/owners-equivalent-rent-and-rent.pdf https://www.bls.gov/cpi/factsheets/owners-equivalent-rent-an...