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0 pointsskybrian4y ago0 comments

Keep in mind that CPI is an average based on what people actually pay, which often lags market rate.

For housing, you might not pay market rate due to having bought a house long ago, or rent control, or some other way of getting a sweetheart deal.

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danhak4y ago

That is a really good point.

I also have a pet theory that CPI understates the cost of housing due to people who are pushed out of entering the market altogether (e.g. homelessness rising, people living with parents longer)

Sort of the same way some people say unemployment figures understate the true number by ignoring discouraged workers / people who have stopped looking altogether. I have a hunch there are many discouraged folks who have stopped looking for housing altogether.

nbardy4y ago

You should take a look at Pia Maloney and Eric Weinstein work.

CPI is broken because it doesn't factor in a "change in taste or prefence"

CPI treats individuals as a giant unmovimg population mean.

To counter they change to use vector fields.

xadhominemx4y ago

Of course preference is included in CPI. Weightings are adjusted periodically as consumer spending patterns shift, and price elasticity is explicitly factored on a quarterly basis in chained cpi

hammock4y ago

Housing is not in CPI. They use "owners' equivalent rent" which is a subjective (cooked) metric.

skybrianOP4y ago

Well, it’s based on a survey. (And surveys are cursed instruments [1].)

> Generally, owners' equivalent rent is obtained through surveys asking homeowners the following question: "If someone were to rent your home today, how much do you think it would rent for monthly, unfurnished and without utilities?" [2]

I would guess that some owners’ ideas of what their house would rent for might lag the market?

[1] https://carcinisation.com/2020/12/11/survey-chicken/

[2] https://www.investopedia.com/terms/o/owners-equivalent-rent....

yokem554y ago

So what housing cost metric should be looked at? The cost for a retiree living in their paid off home? The mortgage payment for brand new homeowner with minimal down? The cost to split an apartment for 2 people? What objective measure should be used?

human4y ago

CPI will never been perfect. They could even break it down into 3 categories: 1. Poor man’s CPI: ramen, rent & public transit 2. Middle class’s CPI: house, beef & cars 3. Rich man’s CPI: penthouse, luxury goods & sports teams

asdff4y ago

All of them? The government has this data already it just needs to be aggregated by someone motivated.

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