“He is in a Sisyphean struggle to convince people that the US economy - where virtually all economic indicators are strong, are trending in a positive direction, and are significantly better than peer countries - is in fact a good economy. And people are furious that he believes the economy is good.”
The payment for the median home is up 74% (real. 108% nominal) since 2019, your chosen comparison point. None of this is captured in the CPI calculation.
Inflation is nearly double what it was in 2019.
The real SP500 is down 14% from its peak and growing at just 2%/yr since Biden took office. It was at 0%/yr as of a few weeks ago.
Housing costs, inflation, and the SP500 are not obscure stats.
The economy is in great shape relative to the situation we were facing, but saying everything is great is denying reality.
Man this is a great example of how even when presented with reality, fake statistics and doom narratives still flourish. Genuinely everyone should read this comment several times.
It FEELS like a true comment. It LOOKS like a true comment. It's not, but can't you feel the righteous indignation bubbling up? As others have pointed out, the actual facts are wrong. The single largest component in the CPI is housing costs, so 'none of this is captured in CPI' is dead wrong. And I can't find whatever the 74% claim is anywhere, but here's FRED on the urban rent index - https://fred.stlouisfed.org/series/CUUR0000SEHA. Rent is up 21% (nominal) since late 2019, which is basically in line with overall inflation.
But man the comment above FEELS true. Doom narratives are so, so easy to spread.
“Man this is a great example of how even when presented with reality, fake statistics and doom narratives still flourish. Genuinely everyone should read this comment several times.”
Is this an introduction to your own comment?
Did it FEEL true that purchase price and interest rate numbers are included in CPI? Did it LOOK true? Why not just look it up? It says exactly what I just said:
“Owned housing units themselves are not priced in the CPI Housing Survey”
“Spending to purchase …houses and other housing units is treated as investment and not consumption in the CPI”
“Interest costs (such as mortgage interest), property taxes, real estate fees, most maintenance, and all improvement costs are part of the cost of the capital good and are also not treated as consumption items.”
As you point out, real rents are only up about 1% while the real payment to purchase the median home is up 74%. Like I said, only the former is reflected in CPI, not the latter.
Now that you’ve been presented with reality, I’m sure you’ll be quick to make sure your fake narrative doesn’t flourish, right?
Price is up 36% while the interest rate has doubled. The payment for the median home at the average interest rate has gone from $1,446/mo to $2,926/mo, more than double on a nominal basis and ~74% on a real basis.
Inflation in 2019 was 1.8%, and in recent months has declined drastically to around 3.5% - so yes, that is double, but from an extremely low (and some would say too low) baseline.
S&P 500:
Jan 22, 2021: 3841
peak: 4766 (Dec 31, 2021)
current: 4586 (4% down from the peak, up 19% from Biden's inauguration)
I will grant that the market has been down/flat for the past 2 years, but I'm generally bemused by the fact that, when the market is up, people say it's not the real economy, but when it's down, it's trotted out as an example of how bad things are.
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.
You seem kind, and I am going to come down hard here. I apologize in advance. Anyone could make the mistake you're making, and the lesson we've learned from social media is apparently: everyone does.
"The payment for the median home is up 74% (real. 108% nominal) since 2019, your chosen comparison point. None of this is captured in the CPI calculation."
That is not only untrue, it is the exact opposite of true. In fact it is the LARGEST SINGLE COMPONENT of the CPI calculation.
This is the most frustrating point about the viral misinformation. People confidently state things they either partially (incorrectly) remember or reason (incorrectly) must be true.
It rarely results in a correction and doesn't seem to result in any introspection on what mistakes led the original poster to be so confident about something incorrect.
“ This is the most frustrating point about the viral misinformation. People confidently state things they either partially (incorrectly) remember or reason (incorrectly) must be true.
It rarely results in a correction and doesn't seem to result in any introspection on what mistakes led the original poster to be so confident about something incorrect.”
The irony is painful. CPI doesn’t capture changes in purchase price or interest rates at all. It only captures rent and owner equivalent rent (what homeowners’ homes would rent for on the open market).
“For an owner-occupied unit, most of the cost of shelter is the implicit rent that owner occupants would have to pay if they were renting their homes, without furnishings or utilities.”
“Owned housing units themselves are not priced in the CPI Housing Survey”
“Spending to purchase …houses and other housing units is treated as investment and not consumption in the CPI”
“Interest costs (such as mortgage interest), property taxes, real estate fees, most maintenance, and all improvement costs are part of the cost of the capital good and are also not treated as consumption items.”
While the real payment to buy the median home is up 74% in four years, rent is up just 1%. Only the latter is included.
Here’s a chance for some of that introspection on how you were so confident about something incorrect. Can you walk me through what your mistakes were that got you here? 🙄
So I bought my house in 1996. My salary, in inflation adjusted terms from then, was 142000, 72K then. To pay my mortgage on a median-priced house took exactly TWO WEEKS of my net pay. TWO WEEKS. You want to posit that it's harder to buy a house now? Rent is terrible? Who do you know pays TWO WEEKS of their take-home pay? And if you DO know people who do, congratulations, housing is relatively no worse in inflation-adjusted terms. But thanks for proving the point of the post because nothing you've said makes any REAL sense, or is backed up by any REAL data, and you proved popping your bubble is hard to impossible because you're only looking for ANYTHING, no matter how obscure, to keep believing what you do.
The Right is looking for evidence to take down Biden & Co., while the Left wants to keep hawking its Late-Stage Capitalism(R) narrative.
Also on both sides, you can have the problem, or you can have the solution. Not both. A problem solved puts certain people out of work. And while those people might be able to make more money doing something else, they will lose--and not regain, at least not immediately--a lot of power.
Too many incentives to think things are going poorly.
I wish I could "like" this post more than once.
Nothing these days provokes a stronger response from the entirely-too-online crowd as "Calm down just a little."
“He is in a Sisyphean struggle to convince people that the US economy - where virtually all economic indicators are strong, are trending in a positive direction, and are significantly better than peer countries - is in fact a good economy. And people are furious that he believes the economy is good.”
The payment for the median home is up 74% (real. 108% nominal) since 2019, your chosen comparison point. None of this is captured in the CPI calculation.
Inflation is nearly double what it was in 2019.
The real SP500 is down 14% from its peak and growing at just 2%/yr since Biden took office. It was at 0%/yr as of a few weeks ago.
Housing costs, inflation, and the SP500 are not obscure stats.
The economy is in great shape relative to the situation we were facing, but saying everything is great is denying reality.
Man this is a great example of how even when presented with reality, fake statistics and doom narratives still flourish. Genuinely everyone should read this comment several times.
It FEELS like a true comment. It LOOKS like a true comment. It's not, but can't you feel the righteous indignation bubbling up? As others have pointed out, the actual facts are wrong. The single largest component in the CPI is housing costs, so 'none of this is captured in CPI' is dead wrong. And I can't find whatever the 74% claim is anywhere, but here's FRED on the urban rent index - https://fred.stlouisfed.org/series/CUUR0000SEHA. Rent is up 21% (nominal) since late 2019, which is basically in line with overall inflation.
But man the comment above FEELS true. Doom narratives are so, so easy to spread.
“Man this is a great example of how even when presented with reality, fake statistics and doom narratives still flourish. Genuinely everyone should read this comment several times.”
Is this an introduction to your own comment?
Did it FEEL true that purchase price and interest rate numbers are included in CPI? Did it LOOK true? Why not just look it up? It says exactly what I just said:
“Owned housing units themselves are not priced in the CPI Housing Survey”
“Spending to purchase …houses and other housing units is treated as investment and not consumption in the CPI”
“Interest costs (such as mortgage interest), property taxes, real estate fees, most maintenance, and all improvement costs are part of the cost of the capital good and are also not treated as consumption items.”
https://www.bls.gov/cpi/factsheets/owners-equivalent-rent-and-rent.htm
As you point out, real rents are only up about 1% while the real payment to purchase the median home is up 74%. Like I said, only the former is reflected in CPI, not the latter.
Now that you’ve been presented with reality, I’m sure you’ll be quick to make sure your fake narrative doesn’t flourish, right?
“I can't find whatever the 74% claim is anywhere”
Median home price: https://fred.stlouisfed.org/series/MSPUS
Average interest rate: https://www.freddiemac.com/pmms
Price is up 36% while the interest rate has doubled. The payment for the median home at the average interest rate has gone from $1,446/mo to $2,926/mo, more than double on a nominal basis and ~74% on a real basis.
I don't think those statistics are accurate.
Housing costs are up, but "imputed rent" is absolutely captured in CPI, and in fact was driving CPI for several months: https://www.bls.gov/cpi/factsheets/owners-equivalent-rent-and-rent.htm
Inflation in 2019 was 1.8%, and in recent months has declined drastically to around 3.5% - so yes, that is double, but from an extremely low (and some would say too low) baseline.
S&P 500:
Jan 22, 2021: 3841
peak: 4766 (Dec 31, 2021)
current: 4586 (4% down from the peak, up 19% from Biden's inauguration)
here's the yearly performance numbers: https://www.macrotrends.net/2526/sp-500-historical-annual-returns
I will grant that the market has been down/flat for the past 2 years, but I'm generally bemused by the fact that, when the market is up, people say it's not the real economy, but when it's down, it's trotted out as an example of how bad things are.
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
You seem kind, and I am going to come down hard here. I apologize in advance. Anyone could make the mistake you're making, and the lesson we've learned from social media is apparently: everyone does.
"The payment for the median home is up 74% (real. 108% nominal) since 2019, your chosen comparison point. None of this is captured in the CPI calculation."
That is not only untrue, it is the exact opposite of true. In fact it is the LARGEST SINGLE COMPONENT of the CPI calculation.
This is the most frustrating point about the viral misinformation. People confidently state things they either partially (incorrectly) remember or reason (incorrectly) must be true.
It rarely results in a correction and doesn't seem to result in any introspection on what mistakes led the original poster to be so confident about something incorrect.
“ This is the most frustrating point about the viral misinformation. People confidently state things they either partially (incorrectly) remember or reason (incorrectly) must be true.
It rarely results in a correction and doesn't seem to result in any introspection on what mistakes led the original poster to be so confident about something incorrect.”
The irony is painful. CPI doesn’t capture changes in purchase price or interest rates at all. It only captures rent and owner equivalent rent (what homeowners’ homes would rent for on the open market).
Don’t take my word for it, straight from the BLS:
https://www.bls.gov/cpi/factsheets/owners-equivalent-rent-and-rent.htm
“For an owner-occupied unit, most of the cost of shelter is the implicit rent that owner occupants would have to pay if they were renting their homes, without furnishings or utilities.”
“Owned housing units themselves are not priced in the CPI Housing Survey”
“Spending to purchase …houses and other housing units is treated as investment and not consumption in the CPI”
“Interest costs (such as mortgage interest), property taxes, real estate fees, most maintenance, and all improvement costs are part of the cost of the capital good and are also not treated as consumption items.”
While the real payment to buy the median home is up 74% in four years, rent is up just 1%. Only the latter is included.
Here’s a chance for some of that introspection on how you were so confident about something incorrect. Can you walk me through what your mistakes were that got you here? 🙄
So I bought my house in 1996. My salary, in inflation adjusted terms from then, was 142000, 72K then. To pay my mortgage on a median-priced house took exactly TWO WEEKS of my net pay. TWO WEEKS. You want to posit that it's harder to buy a house now? Rent is terrible? Who do you know pays TWO WEEKS of their take-home pay? And if you DO know people who do, congratulations, housing is relatively no worse in inflation-adjusted terms. But thanks for proving the point of the post because nothing you've said makes any REAL sense, or is backed up by any REAL data, and you proved popping your bubble is hard to impossible because you're only looking for ANYTHING, no matter how obscure, to keep believing what you do.
The Right is looking for evidence to take down Biden & Co., while the Left wants to keep hawking its Late-Stage Capitalism(R) narrative.
Also on both sides, you can have the problem, or you can have the solution. Not both. A problem solved puts certain people out of work. And while those people might be able to make more money doing something else, they will lose--and not regain, at least not immediately--a lot of power.
Too many incentives to think things are going poorly.
Hey check out the discussion of your chart on Reddit.
https://www.reddit.com/r/inflation/s/CTi8Ty3iHj
Great read. *lu-blee-ah-nah
And people wonder why teens are depressed.