If the official inflation number has barely budged over the past five years, why is the number one expense in most people's lives, their outlay for housing, up so drastically?
July 12, 2006
HousingPanic Stupid Question of the Day
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Denver Foreclosures at a Pace to Break All-Time Record
More than 9,500 real estate foreclosures have been filed in the Denver area in the first half of this year, about 34 percent more than in the first six months of 2005.
If this pace continues, it will top the 1988 Denver foreclosure rate of 17,122. That, to date, is the worst year ever in terms of foreclosures in the Denver area.
Found @ http://www.nizenotes.com/
And as far as inflation goes one just has to walk in to the local supermarket to see inflation, 1 single bottle of coke a year in a half ago was $.99 same bottle today is $1.39 yes gas effects this price as far as delivery costs and such, but needless to say thing are expansive.
I assume this is a rhetorical question, right? The governments inflation figures do not use real estate prices to calculate the cost of housing; they use rents instead.
Seriously, I use my local supermarket to keep track of inflation. One can learn a lot because most of the basic commodities are represented there. And sure, transportation costs of those items has to figure in. One other thing. I have been known to strike up conversations with shoppers asking them if they believe the party line about inflation being low and tame or...
Try it some time. For those of us down toward the bottom of the food chain there is no debate. Inflation is real. They may not know exactly what inflation is or what causes it, but damn it all, they feel it. Everyday.
There is no inflation. DVD players are cheaper now than they were 4 years ago.
/sarc
There is no inflation. DVD players are cheaper now than they were 4 years ago.
"Not BlueRay" or HDDVD big bucks!
Until recently, low interest rates kept the payment the same while prices went up. This is in addition to what others commented about a large fraction of current owners under fixed rate mortgages.
Remember, like stocks, only a smaller percentage of buyers trade their ownership in a given year, thus setting the prices for the rest.
Rising rents would reflect into peoples housing costs, but would also offset owners costs because of the owners equivalent rent, though it has not risen as fast as costs for new purchases.
More math on "hedonic" adjustments:
- Assume most people own their home
- Assume most of these have a fixed mortgage
- Then assume inflation occurs, and this raises rents and real estate taxes
- Owners then get an adjustment for their owners equivalent rent offsetting their tax increase. Thus no inflation to them.
This is why these adjustments are so scary, and distorting.
More on hedonics:
- But, the owners cash flow they must pay out goes up each year, even though the "CPI" says they are OK. Not only do they pay more taxes, they pay more for everything else, such as food, energy, etc.
- By some statistical slight of hand, they "upgrade" the amount they spend on "rent" each year by the real inflation rate, but this is offset by their fixed mortgage payment (money rent). This allows the CPI to say all is well while their cash flows out the door at an ever increasing amount.
I believe this helps explain what we are seeing. My wife is complaining that our food bill has gone from $250-$400 in the last two years. Same stores, not an upgrade to whole paycheck or other high end store...
Lest ye has forgotten, the CPI calculations were revised in 98/99 to show inflation lower by about 1.1% give or take. The main reason was to reduce govt expenditures, all of the SSI, military and others that are paid by the govt have their annual raises tied DIRECTLY to the govt's own CPI calculations. That reduced the wages of millions of people directly and save the Govt billions of dollars.
I love it when they change the military pay day from the 30th of the month to the 1st, that way they shift a whole months worth of pay into a new fiscal year and show that as a "savings". It's kind of funny but crappy also.
Tony
have you been clothes shopping lately? I was amazed that even at Target what used to be cheap clothes are approaching GAP prices.
In fact I bought my first ball cap at the mall in 2 years, it cost $31. I about Sh#t myself. I remember when hats were like $20 for a nice fitted New Era (which prolly cost $1 to make in China).
The Feds lowball reported inflation statistics for two reasons:
1) It limits the growth of inflation indexed entitlement programs which lowers the budget deficit projections
2) It makes economic growth look better because inflation is subracted from the raw numbers to get the change in GDP. If they used the real inflation rates, GDP growth would be 3-5 points lower.
arioch said "Inflation is accelerating, and it is getting tougher to redefine the measures and metrics in order to hide it."
I operate two small businesses and we are seeing the same trends. Since '04 costs for raw materials are up 5%-30%, and shipping costs have doubled in just four years. As a consequence we raised prices 10.4% in January and we will probably have a similar increase in '07.
Our customers are mostly large aerospace corporations with "professional" purchasing departments and they've been going apesh*t when we give them the good news. So far no Chinese operator makes anything equivalent to the equipment we sell, but I expect that will change in the next five years.
When that happy day arrives, I'll probably just shut everything down and retire completely.
There is no inflation. DVD players are cheaper now than they were 4 years ago.
"Not BlueRay" or HDDVD big bucks!
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So there for, hedonistically speaking, it improved, and even if it's more expensive, it's better, so therefore the price stayed the same, hence, no inflation. LMAO
jeans are $150. enough said.
Which goes back to my point of view that all housing costs need to take inflation adjusted cost per sq foot into account for each location. My grandfather use to tell my mother back in the 50s in California that she'd see the day that homes would sell for $1,000,000 and she laughed! She'd have to spend that today in the bay area to replace her house. Of course a lot of homes in the bay area cost more than the inflation adjusted cost per sq foot, one reason I don't live there! I refuse to pay into the ponzi.
Still, in lots of places cost of materials, land, labor etc has gone up and people won't build/sell if there is no profit. This isn't the Soviet Union. There isn't a soul on this site that would sell any product at a loss unless they had too and no one will give their services/labor away if it cost them to do so. If it cost you $30 an hour to work and they paid you $29 an hour you'd skip the job.
And most people will agree that wages are not going up in step with costs and haven't for years. That is the crime of our government who won't raise the minimum wage nine years running but give themselves a big raise every year.
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Good Gosh, is that Hillary?
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