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House Prices, Inflation Adjusted


By ttsmyf   Follow   Sun, 11 Nov 2012, 1:55am PST   1,277 views   9 comments
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Mark D   Mon, 12 Nov 2012, 12:50pm PST   Share   Quote   Permalink   Like   Dislike     Comment 1

maybe now is a good time to enter........

Rental Watch   Wed, 14 Nov 2012, 5:52pm PST   Share   Quote   Permalink   Like (1)   Dislike     Comment 2

I'm going to say this only one more time...

The way they measure CPI has changed dramatically from earlier in the century until today. The most dramatic changes occurred in the early 1980's. The net effect of this is that reported CPI is LOWER than it would have been otherwise.

If you were to use a consistent method of calculating CPI throughout the century, you would find that we have OVERSHOT the trendline to the downside.

Seth Klarman (Baupost) recently noted that if the old way of calculating CPI was used, it would show upwards of 10% inflation...reported is ~2%.

If this "old way" of calculating CPI was used in this graph from 1980 onward (where the big changes occurred in CPI methods), the graph would look dramatically different.

P N Dr Lo R   Thu, 15 Nov 2012, 7:41am PST   Share   Quote   Permalink   Like (1)   Dislike     Comment 3

Rental Watch says

The way they measure CPI has changed dramatically from earlier in the century until today. The most dramatic changes occurred in the early 1980's.

When Social Security benefits were first indexed for inflation in 1975, the government didn't appreciate the long-term ramifications until a few years later. When you see the graph which begins in 1975, it skyrockets in 1979 and 1980, both years of double digit inflation. They realized they had an out of control tiger by the tail and needed to do something quickly, which they did. I understand that if the COLA's were still figured the same way they were in the mid-70's, Social Security checks would be 50% higher today.

ttsmyf   Sat, 17 Nov 2012, 5:50am PST   Share   Quote   Permalink   Like   Dislike     Comment 4

Re. the CPI criticisms of the preceding two Comments, please read this thorough refutation by BLS authors.
http://www.bls.gov/opub/mlr/2008/08/art1full.pdf

Further, the BLS has nearly 1K or 2K professionals (economists, etc.) working there -- any big con co-existing with all those people being silent is negligible probable, I reckon.

thomaswong.1986   Sat, 17 Nov 2012, 6:10am PST   Share   Quote   Permalink   Like   Dislike     Comment 5

ttsmyf says

House Prices, Inflation Adjusted

the so called bulls aka bubble deniers on Pnet dont believe in home prices being flat across the past decades. Therefore they ignore peak prices in 1989 did fall back to 1975 or if you like early 80s prices plus inflation by mid 90s.

ttsmyf   Sat, 17 Nov 2012, 6:17am PST   Share   Quote   Permalink   Like   Dislike     Comment 6

Re. my Comment 4 above and the article linked to, here is a substantial summary in the form of six Q&A.
http://www.bls.gov/cpi/cpiqa.htm

Philistine   Sat, 17 Nov 2012, 6:28am PST   Share   Quote   Permalink   Like   Dislike     Comment 7

ttsmyf says

any big con co-existing with all those people

I don't think it's a matter of conspiracy; I think it's a matter of malcompetent handling. They even acknowledge that consumer substitution behavior makes their index pretty flawed when making historical comparisons.

2% is definitely bogus, however they reach that number. Anybody that eats, uses gas, turns on the lights, wears clothes, etc. knows they are paying noticeably more for everything--whether the above counts as inflation or just dollar devaluation.

David Losh   Sat, 17 Nov 2012, 10:25am PST   Share   Quote   Permalink   Like   Dislike     Comment 8

Philistine says

they are paying noticeably more for everything

The method of determining value of Real Estate is rental income.

It is a flaw that marginalizes the actual value of the asset.

That is why people can climb on the housing train, and feel good about it.

mell   Sun, 18 Nov 2012, 7:05am PST   Share   Quote   Permalink   Like (2)   Dislike     Comment 9

Mark D says

maybe now is a good time to enter........

HIghly doubt it - wages are not reflecting any increase in inflation, 1 on 7 Americans on foodstamps, fiscal cliff awaiting..

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