Define "housing". When it comes to shelter, that is taken into account.
> Anyone with a web browser knows that home prices have experienced a monumental increase.
Because the "C" in CPI stands for consumer. Home prices reflect asset prices. They are not counted in the CPI just like stock and bond prices are not counted: these are all asset classes.
> House prices are an interesting case. Houses are considered capital investment by the [US] BLS. So, when the value of your home increases that's a good thing as you didn't consume the house. In other words, you don't need to replace the house. Consumption goods are different in that you need to replace the thing you bought. Inflation is very bad for consumption goods because it costs you more to replace that thing each time you need it (food, for instance).
> The BLS views housing as a mostly “investment” item as opposed to a consumption item. So, for instance, when you consume a hot dog and have to replace it then the cost of replacement is a direct reflection on your well-being. A $1 hot dog that costs $2 one year later is a material change in living standards, all else equal, since the hot dog is an asset that you literally consume. A house is much more complex. [...]
>
> Of course, anyone who owns a house knows that it’s not that simple. You do basically consume your house over time. For instance, my home has appreciated substantially since I purchased it just 5 years ago and underwent a hellish remodel. At that time the cost of replacement was roughly $300 per square foot. But in the ensuing years the cost of replacement has increased to $400 per square foot. As my physical home falls apart over the years I will need to replace it. But the key point is that, as I replace these components the housing market is likely to revalue the total home value to account for this investment. So even though I am consuming my house over time I am very likely to recoup those costs.
Some company builds machines that make buttons. One of those machines lasts (say) 20 years. The machine is not buttons; the machine provides buttons. The company sort of provides buttons, but at one step removed.
We say that machine is an asset.
The machine is eventually "used up" over its lifetime, but that doesn't make it "consumable" in the sense used here - that's true of many assets (we call it "depreciation").
I think "house as button machine" is a consistent model that matches dragonwriter's usage.
> That's like saying homes don't provide shelter, construction companies do.
No, it's not. Food isn't a durable good that provides “nourishment” for consumption on an ongoing basis; agricultural real estate is, in exactly the same way as residential real estate is for shelter.
Housing prices have only gone up for people that have purchased a new house this year. For people already living in a house, mortgage payments have mostly been stable, or possible even lower, when refinancing for a lower rate. So i can imagine that the average housing costs have only gone up 3.8%.
Define "housing". When it comes to shelter, that is taken into account.
> Anyone with a web browser knows that home prices have experienced a monumental increase.
Because the "C" in CPI stands for consumer. Home prices reflect asset prices. They are not counted in the CPI just like stock and bond prices are not counted: these are all asset classes.
> House prices are an interesting case. Houses are considered capital investment by the [US] BLS. So, when the value of your home increases that's a good thing as you didn't consume the house. In other words, you don't need to replace the house. Consumption goods are different in that you need to replace the thing you bought. Inflation is very bad for consumption goods because it costs you more to replace that thing each time you need it (food, for instance).
* https://www.pragcap.com/forum/topic/assflation/#postid-2165
> The BLS views housing as a mostly “investment” item as opposed to a consumption item. So, for instance, when you consume a hot dog and have to replace it then the cost of replacement is a direct reflection on your well-being. A $1 hot dog that costs $2 one year later is a material change in living standards, all else equal, since the hot dog is an asset that you literally consume. A house is much more complex. [...] > > Of course, anyone who owns a house knows that it’s not that simple. You do basically consume your house over time. For instance, my home has appreciated substantially since I purchased it just 5 years ago and underwent a hellish remodel. At that time the cost of replacement was roughly $300 per square foot. But in the ensuing years the cost of replacement has increased to $400 per square foot. As my physical home falls apart over the years I will need to replace it. But the key point is that, as I replace these components the housing market is likely to revalue the total home value to account for this investment. So even though I am consuming my house over time I am very likely to recoup those costs.
* https://www.pragcap.com/should-house-prices-be-in-the-cpi/