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How can inflation adjusted income be up and there still be an affordability crisis?

WalterBright 10mo ago
Inflation also corrodes your savings and investments.
eru 10mo ago
The price of housing can rise even faster than incomes. Housing is only a part of the basket used to measure inflation. Housing's price rose faster than the weighted basket average, some other goods and services rose slower or even fell.
- woooooo 10mo ago
  Housing, schooling, healthcare, daycare, food. Samsung TV purchasing power has skyrocketed, though, so there's that.
- pbhjpbhj 10mo ago
  Accommodation costs are the first part of any sensible measure of inflation. If you're not factoring in housing then you're fudging the figures.
  - hdgvhicv 10mo ago
    Many people don’t see housing inflation - if you bought a house in 2020 and house prices were up 80% since then it doesn’t affect your housing costs, especially in the US where mortgage rates are fixed for length of term even if interest rates sky rocket.
  - eru 10mo ago
    Yes? Who says otherwise? As long as accommodation isn't 100% of your basket of goods and services you use to measure inflation, accommodation can rise in price faster (or slower) than the basket. This ain't exactly rocket science.
    - xboxnolifes 10mo ago
      If the mandatory basket item expense raises, it should also become a larger portion of basket, as the basket is supposed to measure the cost of living. So either CPI is not properly measuring the cost of living, or there isn't an affordability crisis. You cannot have rising inflation adjusted wages and worse spending power, unless the inflation is not being measured meaningfully.
haizhung 10mo ago
Housing is not part of the inflation calculation. There IS a housing inflation crisis.
gnz11 10mo ago
Household income is more than just wages. Household income can go up while wages remain stagnant or shrinking because other pieces of the pie are increasing (e.g. work benefits, investments, money from the government). https://fredblog.stlouisfed.org/2016/09/sources-of-household-income/ https://fredblog.stlouisfed.org/2016/09/sources-of-household...

Inflation also corrodes your savings and investments.

eru 10mo ago

The price of housing can rise even faster than incomes. Housing is only a part of the basket used to measure inflation. Housing's price rose faster than the weighted basket average, some other goods and services rose slower or even fell.

woooooo 10mo ago
Housing, schooling, healthcare, daycare, food. Samsung TV purchasing power has skyrocketed, though, so there's that.
pbhjpbhj 10mo ago
Accommodation costs are the first part of any sensible measure of inflation. If you're not factoring in housing then you're fudging the figures.
- hdgvhicv 10mo ago
  Many people don’t see housing inflation - if you bought a house in 2020 and house prices were up 80% since then it doesn’t affect your housing costs, especially in the US where mortgage rates are fixed for length of term even if interest rates sky rocket.
- eru 10mo ago
  Yes? Who says otherwise? As long as accommodation isn't 100% of your basket of goods and services you use to measure inflation, accommodation can rise in price faster (or slower) than the basket. This ain't exactly rocket science.
  - xboxnolifes 10mo ago
    If the mandatory basket item expense raises, it should also become a larger portion of basket, as the basket is supposed to measure the cost of living. So either CPI is not properly measuring the cost of living, or there isn't an affordability crisis. You cannot have rising inflation adjusted wages and worse spending power, unless the inflation is not being measured meaningfully.

haizhung 10mo ago

Housing is not part of the inflation calculation. There IS a housing inflation crisis.

gnz11 10mo ago

Household income is more than just wages. Household income can go up while wages remain stagnant or shrinking because other pieces of the pie are increasing (e.g. work benefits, investments, money from the government). https://fredblog.stlouisfed.org/2016/09/sources-of-household-income/ https://fredblog.stlouisfed.org/2016/09/sources-of-household...