Your link to the BLS website says exactly what I said. Did you read it? The cost to purchase a home is not included in CPI. Mortgage interest is not included in CPI. What an owned home would rent for is included in CPI. This is all in your link, it’s only like 3 paragraphs long. Just read it next time.
As for the stock market, you’re using nominal numbers to “correct” a claim about real numbers.
Your link to the BLS website says exactly what I said. Did you read it? The cost to purchase a home is not included in CPI. Mortgage interest is not included in CPI. What an owned home would rent for is included in CPI. This is all in your link, it’s only like 3 paragraphs long. Just read it next time.
As for the stock market, you’re using nominal numbers to “correct” a claim about real numbers.
You said that the cost of buying a home is not included in the CPI, but that just isn't true. Whether or not the literal price of a home is included, as housing costs in general go up, the imputed rent of a house will go up, and (as I said), that is included in the CPI. It's not like the cost of a house is somehow divorced from its imputed rent.
Real rent is up 1% in four years. The real payment to purchase the median home is up 74% over that time period.
My whole point is that the latter is not reflected in CPI at all because there has been no change in the former. What my home would rent for if I didn’t live in it hasn’t budged, what it would cost someone to buy it has more than doubled on a nominal basis.
I would love to see your source on that, because it would imply that renting a home has become an incredible bargain compared to buying, and I seriously doubt that is correct.
I have been paying attention, which is why I don't believe rents and house prices have diverged. The graph is the rent CPI, which means it's in real dollars - it's 26% in five years, not 1%. The median price in Q3 2018 was 330,900 and in Q3 2023 it was 431k, a 30% increase. That tracks very closely with the increase in rent.
I agree with you that the rise in interest rates means that monthly payments on those new homes have gone up, but that is a small percentage of overall homeowners in America.
Regardless, the original point stands: the CPI is taking into account the overall rising cost of housing.
inflation-adjusted. Look at 1940, the rent figure is 20x lower.
This is just tiresome. The original point was that the cost to purchase a home has gone way up and that isn’t reflected in CPI at all. It’s a non-controversial fact for anyone with even a cursory understanding of CPI and the housing market. Yet here we are 8 comments deep with failed attempts to refute it. Why?
See I knew someone was going to do this, which is why I included this sentence:
>"You can keep looking for a ‘but actually’ statistic that looks bad, but unless you reach for something obscure and weird you’re not going to find it."
Sure, if you only look at 'median payment to purchase a new home' then housing costs are up 74%! Bad! But most people *don't purchase a new home every year*. In fact, most people live in a home they bought years ago at a low interest rate or they rent. Actual housing costs, the kind that most people in the real world are actually experiencing, have not had anything close to a 74% increase.
I concede that you indeed found a weird, counter-intuitive statistic that says the economy is bad. It's a terrible way to judge things, and it's also confusing an asset price with a cost, but you did it! I'm glad you also acknowledged that rents are only up 1% real terms, which is by far the more important statistic for the actual economy.
I don't think you were necessarily losing this argument until this post here. Ignoring the emoji and snark - you've made a case that it's a bad time to buy a house. But even still homeownership is slightly up from 2019!
This is the exact sort of dooming that is such an issue. You have highlighted one aspect of housing costs that is worse, but it's just that - one aspect. You can't extrapolate that out to every single renter out there. The price of a home right now has very little impact on the person who wants to buy a home in 3 years, and no impact at all on the 21 year old living with their parents who shouldn't and wouldn't be buying a house regardless of what the economic state is.
But to bring things out of the weeds - I don't know what your broader point is at this point. Do you think the economy is actually doing poorly and that your metrics of choice (median house price and the S&P 500) are better measurements of that than the indicators that are being used to say its doing well (unemployment, wages, net worth, etc.).
Your link to the BLS website says exactly what I said. Did you read it? The cost to purchase a home is not included in CPI. Mortgage interest is not included in CPI. What an owned home would rent for is included in CPI. This is all in your link, it’s only like 3 paragraphs long. Just read it next time.
As for the stock market, you’re using nominal numbers to “correct” a claim about real numbers.
You said that the cost of buying a home is not included in the CPI, but that just isn't true. Whether or not the literal price of a home is included, as housing costs in general go up, the imputed rent of a house will go up, and (as I said), that is included in the CPI. It's not like the cost of a house is somehow divorced from its imputed rent.
They are absolutely divorced in the short term.
Real rent is up 1% in four years. The real payment to purchase the median home is up 74% over that time period.
My whole point is that the latter is not reflected in CPI at all because there has been no change in the former. What my home would rent for if I didn’t live in it hasn’t budged, what it would cost someone to buy it has more than doubled on a nominal basis.
I would love to see your source on that, because it would imply that renting a home has become an incredible bargain compared to buying, and I seriously doubt that is correct.
Have you not paid any attention to the housing market?
The numbers for buying, with sources (+70% real, +102% nominal): https://www.infinitescroll.us/p/the-age-of-doom/comment/45006179
Rent (+1% real, +21% nominal): https://fred.stlouisfed.org/series/CUUR0000SEHA
I have been paying attention, which is why I don't believe rents and house prices have diverged. The graph is the rent CPI, which means it's in real dollars - it's 26% in five years, not 1%. The median price in Q3 2018 was 330,900 and in Q3 2023 it was 431k, a 30% increase. That tracks very closely with the increase in rent.
You can see here how that factors into CPI: https://www.bls.gov/news.release/cpi.t01.htm
I agree with you that the rise in interest rates means that monthly payments on those new homes have gone up, but that is a small percentage of overall homeowners in America.
Regardless, the original point stands: the CPI is taking into account the overall rising cost of housing.
No, the rent chart is not
inflation-adjusted. Look at 1940, the rent figure is 20x lower.
This is just tiresome. The original point was that the cost to purchase a home has gone way up and that isn’t reflected in CPI at all. It’s a non-controversial fact for anyone with even a cursory understanding of CPI and the housing market. Yet here we are 8 comments deep with failed attempts to refute it. Why?
See I knew someone was going to do this, which is why I included this sentence:
>"You can keep looking for a ‘but actually’ statistic that looks bad, but unless you reach for something obscure and weird you’re not going to find it."
Sure, if you only look at 'median payment to purchase a new home' then housing costs are up 74%! Bad! But most people *don't purchase a new home every year*. In fact, most people live in a home they bought years ago at a low interest rate or they rent. Actual housing costs, the kind that most people in the real world are actually experiencing, have not had anything close to a 74% increase.
I concede that you indeed found a weird, counter-intuitive statistic that says the economy is bad. It's a terrible way to judge things, and it's also confusing an asset price with a cost, but you did it! I'm glad you also acknowledged that rents are only up 1% real terms, which is by far the more important statistic for the actual economy.
I don't think you were necessarily losing this argument until this post here. Ignoring the emoji and snark - you've made a case that it's a bad time to buy a house. But even still homeownership is slightly up from 2019!
https://fred.stlouisfed.org/series/RHORUSQ156
This is the exact sort of dooming that is such an issue. You have highlighted one aspect of housing costs that is worse, but it's just that - one aspect. You can't extrapolate that out to every single renter out there. The price of a home right now has very little impact on the person who wants to buy a home in 3 years, and no impact at all on the 21 year old living with their parents who shouldn't and wouldn't be buying a house regardless of what the economic state is.
But to bring things out of the weeds - I don't know what your broader point is at this point. Do you think the economy is actually doing poorly and that your metrics of choice (median house price and the S&P 500) are better measurements of that than the indicators that are being used to say its doing well (unemployment, wages, net worth, etc.).