Chart of the Week: Actual Housing Costs (w/o BLS Adjustments
Before 1983, CPI measured housing inflation by looking at what it cost to own a home (house prices, mortgage, property taxes). After 83, BLS changed the housing component, using the concept of Owner’s Equivalent Rent. Revert back to the true cost of housing, and Core CPI spikes to a more realistic 5.3%.
Actual Housing Costs (w/o BLS Adjustments)
BLS perversely lowers Owner’s Equivalent Rent further as utility costs go up: “CPI calculated the pure rent of the matched renters by removing the value of any landlord-provide utilities.”
Quote of the Day:
"Failure is a part of success. There is no such thing as a bed of roses all
your life. But failure will never stand
in the way of success if you learn from it."
~ Hank Aaron
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Rookie mistake, BR: You can't use OFHEO data as "actual housing costs."
It is true that home prices are rising faster than equivalent rent. BUT THEY ARE ONLY RISING FOR NEW BUYERS!
If I bought my home 30 years ago for $30,000 and it's now worth $3 million, you'd say my housing costs have gone up 10,000%. But I look at my statement and it says I paid off my mortgage this month. and my mortgage payments never budged!! (Don't ask about my taxes!!) And now I'm sitting on a fortune!!
BLS adjustments are bad, but BR adjustments are even worse!
Posted by: fred c. dobbs | Oct 17, 2005 5:25:57 PM
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