The Residential Real Estate Crash Index Message Board

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Strategies & Market Trends : The Residential Real Estate Crash Index

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To: Wyätt Gwyön who wrote (34506)	6/27/2005 3:50:47 PM
From: mishedlo	Read Replies (4) of 306849

rent is used, but "homeownership" is also used: owner's equivalent rent (OER) is the largest weighting in the entire CPI, with about 23% weighting. thus, nearly a quarter of the CPI is just a statistical fantasy designed expressly to make the CPI lower (so that government payouts can be reduced). I challenge that statement. There are many problems with using home prices directly. For starters many people own their home for years and are not affected mortgage wise over time. In fact, for those locking in lower rates, some home expense have DROPPED. Increasing home prices primarily affects NEW buyers. It also affects property taxes but then again refis at lower interest rates helped. In states like CA, it did not affect property taxes at all. People keep repeating statements like you made and never once address the issues I raise. Furthermore, people have a choice. They can rent if they want to. Is the fact that housing is in an enormous bubble grounds for raising the CPI? I think not. Furthermore houses keep getting bigger and bigger and bigger. That would also need to be factored into any equation. With 1/3 of the people renting, let's say 1/3 of the people buying a home and staying in it for years, at BEST you can claim that housing costs are rapidly rising for new first time buyers. I doubt that is 1/3 but adding in those trading up vs those trading down and perhaps that all nets out to 1/3. Figure the boom areas where most of the appreciation is rampant speculation and will likely be given back over the next fews years, I seriously doubt you have much a case for using house prices vs rent at all. Until someone properly addresses those issues, this is another red herring. That said, do I think OER understates inflation? Yes I do. But not as badly as everyone else does given the above discussion. Mish

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