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> Houses aren't normally consumed. That is just a technicality. Housing is the greatest one time and recurring expense most people have and change in prices fo

by throwaway_1928 4y ago

> Houses aren't normally consumed. That is just a technicality. Housing is the greatest one time and recurring expense most people have and change in prices for housing has the greatest impact on their perception of how expensive things are.

sokoloff 4y ago
The monthly/annual use of a space to shelter is the service that is being consumed. The perpetual right of ownership of that space to shelter is not being consumed. I don't think the CPI is meant to capture people's perception of how expensive things are. If their perception differs from the reality of what they're consuming, it's more important for CPI to track the consumption than the perception. "The CPI is wrong because it doesn't match people's perception" doesn't make much sense to me.
throw0101a 4y ago
> That is just a technicality. Housing is the greatest one time and recurring expense most people have and change in prices for housing has the greatest impact on their perception of how expensive things are. Taken into account, at least in Canada: > In measuring changes in the cost of owned accommodation, Statistics Canada considers six essential components: mortgage interest cost; replacement cost; property taxes; homeowners’ home and mortgage insurance; maintenance and repairs; and other owned accommodation expenses. > Rather than looking at the price of purchasing a house, the idea is to treat a homeowner as if they are renting their own dwelling, and track any expenses that a landlord would normally incur. As Fred Barzyk, Director of Consumer Prices Division explains, the question we want to answer in the shelter index, is “what does it cost to run your home?" * https://www.statcan.gc.ca/en/blog/cs/shelter-cost https://www.statcan.gc.ca/en/blog/cs/shelter-cost See notes on 2021: > The owned accommodation price index (+4.1%) rose at a faster pace than the rented accommodation price index (+1.7%) in 2021. > The upkeep of a property, or the homeowners' replacement cost, was up 11.4% on an annual average basis, compared with a 2.0% increase in 2020. The homeowners' replacement cost, a key driver of owned accommodation price growth, is linked to the price of new homes. New home prices rose consistently throughout 2021. The homeowners' replacement cost increased the most in Manitoba (+17.6%), with Prince Edward Island (+14.7%), Quebec (+14.3%) and Nova Scotia (+12.1%) also recording strong annual average movements. * https://www150.statcan.gc.ca/n1/daily-quotidien/220119/dq220119b-eng.htm https://www150.statcan.gc.ca/n1/daily-quotidien/220119/dq220...
randomdata 4y ago
> greatest one time ... expense That's the problem with house prices, regardless of whether or not you think they should be included in CPI, being that the average person is likely to only buy one or two in their life, leaving very little data about how their perception has changed over time. The best reason for choosing a measure of consumables is that they are purchased frequently by most people, providing information about how perceptions are changing on a regular basis. > has the greatest impact on their perception of how expensive things are. That would be more significant if we were talking about cost of living, but since we're talking about inflation, the actual goods selected in the basket don't matter all that much. The basket just has to be large enough to filter out the noise of individual products that have increased in value at a rate faster than the currency (or vice versa). And as it pertains to Canada, housing has appeared to be especially noisy of late, making it a poor choice for tracking inflation even ignoring all of the other problems with it.

sokoloff 4y ago

The monthly/annual use of a space to shelter is the service that is being consumed. The perpetual right of ownership of that space to shelter is not being consumed. I don't think the CPI is meant to capture people's perception of how expensive things are. If their perception differs from the reality of what they're consuming, it's more important for CPI to track the consumption than the perception. "The CPI is wrong because it doesn't match people's perception" doesn't make much sense to me.

throw0101a 4y ago

> That is just a technicality. Housing is the greatest one time and recurring expense most people have and change in prices for housing has the greatest impact on their perception of how expensive things are. Taken into account, at least in Canada: > In measuring changes in the cost of owned accommodation, Statistics Canada considers six essential components: mortgage interest cost; replacement cost; property taxes; homeowners’ home and mortgage insurance; maintenance and repairs; and other owned accommodation expenses. > Rather than looking at the price of purchasing a house, the idea is to treat a homeowner as if they are renting their own dwelling, and track any expenses that a landlord would normally incur. As Fred Barzyk, Director of Consumer Prices Division explains, the question we want to answer in the shelter index, is “what does it cost to run your home?" * https://www.statcan.gc.ca/en/blog/cs/shelter-cost https://www.statcan.gc.ca/en/blog/cs/shelter-cost See notes on 2021: > The owned accommodation price index (+4.1%) rose at a faster pace than the rented accommodation price index (+1.7%) in 2021. > The upkeep of a property, or the homeowners' replacement cost, was up 11.4% on an annual average basis, compared with a 2.0% increase in 2020. The homeowners' replacement cost, a key driver of owned accommodation price growth, is linked to the price of new homes. New home prices rose consistently throughout 2021. The homeowners' replacement cost increased the most in Manitoba (+17.6%), with Prince Edward Island (+14.7%), Quebec (+14.3%) and Nova Scotia (+12.1%) also recording strong annual average movements. * https://www150.statcan.gc.ca/n1/daily-quotidien/220119/dq220119b-eng.htm https://www150.statcan.gc.ca/n1/daily-quotidien/220119/dq220...

randomdata 4y ago

> greatest one time ... expense That's the problem with house prices, regardless of whether or not you think they should be included in CPI, being that the average person is likely to only buy one or two in their life, leaving very little data about how their perception has changed over time. The best reason for choosing a measure of consumables is that they are purchased frequently by most people, providing information about how perceptions are changing on a regular basis. > has the greatest impact on their perception of how expensive things are. That would be more significant if we were talking about cost of living, but since we're talking about inflation, the actual goods selected in the basket don't matter all that much. The basket just has to be large enough to filter out the noise of individual products that have increased in value at a rate faster than the currency (or vice versa). And as it pertains to Canada, housing has appeared to be especially noisy of late, making it a poor choice for tracking inflation even ignoring all of the other problems with it.