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With this logic we should also exclude prices of cars, computers because that’s also an asset that you can just rent rather than own. Houses used to be include

by pzo 3y ago

With this logic we should also exclude prices of cars, computers because that’s also an asset that you can just rent rather than own. Houses used to be included few decades ago in inflation calculation - this sounds more like trying to hide how much price increases. Similar things happen in taxation. In EU in many countries you have Brutto salaries that includes employee contribution for healthcare, but most people don’t know that employer on top of that pays also another half. So when people calculate their after tax salary they thing that only 35% is tax when in real life it’s 45%. Include VAT, duty tax, excise and easily you pay 60% taxes. If politicians would make this clear with just one single 60% tax most people would be furious and go to street - that’s why they are using this salami strategy.

sokoloff 3y ago
The cost of housing (the consumed service/utility) is still included in CPI calculations. The cost of houses (the durable structure sitting on land) is not. https://news.ycombinator.com/item?id=36534866 https://news.ycombinator.com/item?id=36534866
nabla9 3y ago
> cars, computers because that’s also an asset that you can just rent rather than own. Those are not investment assets. They deprecate towards zero. The CPI is not supposed to include investments, and owning a house has aspects of both investment and consumption. Until 1983, the CPI included housing costs, but it was changed because it screws up what is measured. The current method is better. The current measure takes into account owners’ equivalent rent. It's based on the trend of costs to rent a home, not to buy one.
- pzo 3y ago
  Houses shouldn’t be investment. Anything could be investment. We had many bubbles in the past like tulip. It’s just tulip are not essential to live. You can imagine having idea to make cars also an investment and buying all available cars as investment. Normally market will try to make up the demand and build more cars but with houses it’s more complicated because you wanna live where is infrastructure - and that takes decades to build. From recent examples when Covid started everyone was “investing” in hand sanitizers, masks, gloves - it was crazy expensive and so short in supplies that even pharmacies couldn’t get it from wholesellers - scalpers instead where making a killing . But you cannot just ramp up house production that fast.
  - maxerickson 3y ago
    You can't really prevent something from being an investment. Which isn't to say I disagree with you, policy should favor direct housing affordability over things like price appreciation and subsidizing ownership. I wonder if there's a sensible way to limit how much leverage Fanny and Freddie will back, maybe by shortening the maximum allowed term of mortgages as interest rates fall below some specified point. Not sure you can do that in a way that avoids a cliff though.

by pzo 3y ago

sokoloff 3y ago

The cost of housing (the consumed service/utility) is still included in CPI calculations. The cost of houses (the durable structure sitting on land) is not. https://news.ycombinator.com/item?id=36534866 https://news.ycombinator.com/item?id=36534866

nabla9 3y ago

> cars, computers because that’s also an asset that you can just rent rather than own. Those are not investment assets. They deprecate towards zero. The CPI is not supposed to include investments, and owning a house has aspects of both investment and consumption. Until 1983, the CPI included housing costs, but it was changed because it screws up what is measured. The current method is better. The current measure takes into account owners’ equivalent rent. It's based on the trend of costs to rent a home, not to buy one.

pzo 3y ago
Houses shouldn’t be investment. Anything could be investment. We had many bubbles in the past like tulip. It’s just tulip are not essential to live. You can imagine having idea to make cars also an investment and buying all available cars as investment. Normally market will try to make up the demand and build more cars but with houses it’s more complicated because you wanna live where is infrastructure - and that takes decades to build. From recent examples when Covid started everyone was “investing” in hand sanitizers, masks, gloves - it was crazy expensive and so short in supplies that even pharmacies couldn’t get it from wholesellers - scalpers instead where making a killing . But you cannot just ramp up house production that fast.
- maxerickson 3y ago
  You can't really prevent something from being an investment. Which isn't to say I disagree with you, policy should favor direct housing affordability over things like price appreciation and subsidizing ownership. I wonder if there's a sensible way to limit how much leverage Fanny and Freddie will back, maybe by shortening the maximum allowed term of mortgages as interest rates fall below some specified point. Not sure you can do that in a way that avoids a cliff though.