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House Prices, Inflation Adjusted

By ttsmyf   2012 Nov 11, 1:55am   2 links   3,700 views   10 comments   watch (1)   quote      

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1   RealEstateIsBetterThanStocks   174/174 = 100% civil   2012 Nov 12, 12:50pm  ↑ like   ↓ dislike   quote    

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

2   Rental Watch     2012 Nov 14, 5:52pm  ↑ like (2)   ↓ dislike   quote    

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.

3   P N Dr Lo R   254/255 = 99% civil   2012 Nov 15, 7:41am  ↑ like (1)   ↓ dislike   quote    

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.

4   ttsmyf     2012 Nov 17, 5:50am  ↑ like   ↓ dislike   quote    

Re. the CPI criticisms of the preceding two Comments, please read this thorough refutation by BLS authors.

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.

5   thomaswong.1986     2012 Nov 17, 6:10am  ↑ like   ↓ dislike   quote    

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.

6   ttsmyf     2012 Nov 17, 6:17am  ↑ like   ↓ dislike   quote    

Re. my Comment 4 above and the article linked to, here is a substantial summary in the form of six Q&A.

7   Philistine   12/12 = 100% civil   2012 Nov 17, 6:28am  ↑ like   ↓ dislike   quote    

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.

8   David Losh     2012 Nov 17, 10:25am  ↑ like   ↓ dislike   quote    

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.

9   mell   63/63 = 100% civil   2012 Nov 18, 7:05am  ↑ like (2)   ↓ dislike   quote    

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..

10   Rental Watch     2015 Aug 22, 7:36pm  ↑ like   ↓ dislike   quote    

Look up the Boskin Commission and then tell me that the BLS hasn't changed how the math is done. It may not be extreme, but 0.5%-1.0% over 20 years starts to add up when you are trying to discern long-term trends.

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