4 ms·
Housing prices aren’t included in the inflation basket of goods.
by jraby3 4y ago
Housing prices aren’t included in the inflation basket of goods.
- dragontamer 4y agoYes it is. See "Shelter", filed under "Services less energy services".
- adam_arthur 4y agoThis is rents, not prices. Why are there so many comments confusing this? Nobody is implying rents when they say "housing prices"
- pcthrowaway 4y agoThe person upthread said "housing costs", and that absolutely includes rents (that's primarily what I think of when I think of the "cost of housing")
- adam_arthur 4y agoThe person who was directly responded to said: "Housing prices aren’t included in the inflation basket of goods." Which is correct. What was said up thread is irrelevant. If you want to correct him for stating that as off topic or misconstruing the parent comment, that's fine. But spreading misinformation about home prices being included in CPI is not. Again, nobody is implying "rents" when they say "housing prices".
- paulddraper 4y agoThose are equivalent.
- adam_arthur 4y agoThey are not. Rent prices and home prices are not equivalent. Am I in some twilight zone episode here?
- paulddraper 4y agoThey are equivalent. If an asset's income increases, the value of the asset increases. Purchasing is less liquid than renting, so it tends to lag. And some characteristics are more amenable to renting vs other use. But overall their trends are equivalent .
- adam_arthur 4y agoYou’re completely wrong. Asset values are not just a function of cash flow but also discount rates, growth in cash flow, and valuation multiples. Real estate cap rates have been compressing for decades, for example (same cash flow equals higher value, all else equal) Please don’t spread misinformation in these threads
- paulddraper 4y agoValuation multiples is a symptom, not a cause. Discount rates have largely to do with inflation, and comes out in the wash of asset valuation changes. > Asset values are not just a function of cash flow but also growth in cash flow :/ --- Price to rent ratio: https://tradingeconomics.com/united-states/price-to-rent-ratio https://tradingeconomics.com/united-states/price-to-rent-rat... Though really, that's just a graph of inflation.
- deleted 4y ago[deleted]
- alephnerd 4y agoThis is the 5th time I've seen this comment on HN. How did this misinformation start?!? CPI calculation includes housing. The BLS is very open about it. Edit: misread GP as Housing COST. Not Housing PRICE Housing Price is NOT included in CPI. Housing Cost IS (via the OER)
- adam_arthur 4y agoIt doesn't. It includes a survey based owners equivalent rents (OER), and a separate measure for tenant rents. Home prices used to be a factor in CPI calculations, but haven't been for decades now. It can be argued that rent is more relevant than valuations, since values fluctuate with rates... but ignoring valuations arguably allows asset bubbles to form more readily, which has its own downstream consequences. In general, the CPI is not well suited to its purpose as the data is highly lagged. There are public rent measures that are much more real time, and would allow Fed to act more readily on current data. https://www.bls.gov/cpi/factsheets/owners-equivalent-rent-and-rent.htm https://www.bls.gov/cpi/factsheets/owners-equivalent-rent-an...
- alephnerd 4y agoCPI includes housing costs! Edit: I misread GP's comment as Housing Cost, not House Price. Though in my defense, I have seen some people imply Housing Cost isn't included.