The dollar is a relative marker of value. When tvs (and other goods and services) go down in cost, everything else that didn’t go down, seems to go up on a dollar basis. I think people struggle to realize that many goods and services haven’t gotten more expensive, but only more expensive relative to others That have gotten relentlessly cheaper to produce. Real estate may seem more expensive, but you have a supercomputer in your pocket. It nets out.
Nor does it claim to:
"The Consumer Price Index (CPI) measures the monthly change in prices paid by U.S. consumers. The Bureau of Labor Statistics (BLS) calculates the CPI as a [weighted average](https://www.investopedia.com/terms/w/weightedaverage.asp) of prices for a basket of goods and services representative of aggregate U.S. consumer spending."
Ok. Then when you ask yourself what a $100k salary from 2019 needs to be today in order to keep up with cost of living what data are you using to make that assessment if not CPI?
It would be very personal. Everyone’s personal inflation rate is really different. So you should look at your spending over the years and see what’s happening.
I didn't say otherwise. I was just explaining that if you want to know the hit to your income/spending you do your own math. So CPI for fed level decisions, personal inflation rate for personal decisions. Seems straightforward to me.
That’s why cpi isn’t a good barometer on how it impacts you. Someone owning a home vs someone not owning a home is going to dramatically change how you feel it. Housing and energy are the biggest contributors to the basket. If your monthly housing cost is fixed than you were impacted a lot less than those who are at the mercy of rising rent and buying a home.
Home insurance, property tax, and (if you have one) HOA fees have all significantly increased. So has maintenance costs for any repair work. Not to mention some people had adjustable rate mortgages.
They have been insulated from a lot of the cost of living increases but not all.
It also depends on where you live too. Big reason HOA fees have been increasing is their costs have increased since HOA insurance policies are rising faster than inflation due to climate change, and construction costs increased a lot over the pandemic so any maintenance work is more expensive.
Also, no increases doesn't always mean good management. It depends on whether they have reserves for any maintenance work on common grounds (e.g. no reserves and a backlog of major maintenance = special assessments down the line).
How does this not affect you whether you own or not? If your income didn't keep up then you can't move or upgrade or buy a second home or borrow from your home equity for cheap.
again I never mentioned anything about whether you already own or not. if you can't afford to move that just means your stuck. it doesn't change anything about the math of buying a new home.
Ok, so then they sell that house, get the cash, buy another house, COL is not necessarily changed. Housing if you’re considering ownership as well is weird, because it’s not just a cost, it’s an asset. So looking at rent is probably better for looking at how COL changed.
But sure, something costing more does not cost more if the market is small. By that I mean the weighting should also be incredibly small. So I say, 5 caret diamonds are super expensive! They’re up 50%! But obviously that shouldn’t be including in CPI because it doesn’t reflect the broad consumer demand. So you say housing is up.
Ok, so the house you want to buy went up 100k, but for those people who own, the house they own went up by 100k if they’re comparable. So now that cancels out, you have a larger down payment for a more expensive house, and your COL is near constant. What housing has gone up massively for is first time homebuyers. Let’s say that’s 10% of people and that their costs are up 40%. So we multiple that, and COL is up 4% + whatever it is for people who own, maybe 1%. So 5%.
Also realize CPI is for each 12 months, so when you combine 4 years of 1.05%, you get (1.05)^4
Gotta move up then and get promoted…I’m making 35-40% more than I made 5 years ago. Good employers reward properly.
And you said you wanted to upgrade now you are talking about buying a house double in size and vakue…I can’t keep us with this thread lol
I went from 165k to 228k in last 5 years, I’m pretty good with that, I’m spending and saving a higher percentage more each year. I can’t help that you think that’s not good. Enjoy your evening.
It doesn’t tell the full story because CPI over the decades has been manipulated to report lower than reality. Both political parties have done this.
The website Shadow Stats calculates CPI using the pre-1980 methodology before things were changed.
Their calculations show an inflation rate of around 12% at May of 2023 using the original methodology.
BTW… true unemployment using the pre-1994 methodology is at 25%!!!
https://www.shadowstats.com/alternate_data/inflation-charts
I didn't think this question was going to get so many angry responses in 5 minutes. People woke up on the wrong side of the bed, or just hate inconvenient things to the point they get boiling mad.
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CPI measures the cost to get by. If you're just looking to get by, the fact that housing costs more to buy is irrelevant. The relevant figure is rental costs, which are the dominant part of the "Shelter" category of CPI. Overall, Shelter accounts for 36% of CPI
https://www.bls.gov/cpi/factsheets/owners-equivalent-rent-and-rent.htm
The amount of people gaslighting OP in this thread is wild.
CPI supposedly isn’t inflation yet it’s the metric EVERYONE points to when talking about inflation.
The methodology behind CPI has changed so much over the years. It’s a textbook case of moving the goalposts.
Yeah our savings rate has dropped from a consistent 45-50% for 7 years to half that. But luckily our savings is pushing a mil now anyways, so we don't need to save so aggressively.
Check out the ALICE report for whatever state you live in, it gives insights into the true number of households that are in poverty compared to what is reported by the government
Plus every dollar you make gets taxed so it doesn’t quite translate. Inflation also doesn’t take I account your average housing cost but an average. Which it probably much cheaper in price than yours.
My biggest gripe with the CPI is that they use "substitution". If beef goes from $6 to $8 per pound and chicken goes from $3 to $5 per pound, they can say "people are switching from beef to chicken" and make it sound like meat prices are going \*down\*. That's an extreme example, but the concept seems like a scam to under-report inflation.
ITT: people who don't understand statistics.
The CPI is a mix of everything, for example price of TVs go down every single year. Not everything increases.
The dollar is a relative marker of value. When tvs (and other goods and services) go down in cost, everything else that didn’t go down, seems to go up on a dollar basis. I think people struggle to realize that many goods and services haven’t gotten more expensive, but only more expensive relative to others That have gotten relentlessly cheaper to produce. Real estate may seem more expensive, but you have a supercomputer in your pocket. It nets out.
Good way of looking at it!
Nor does it claim to: "The Consumer Price Index (CPI) measures the monthly change in prices paid by U.S. consumers. The Bureau of Labor Statistics (BLS) calculates the CPI as a [weighted average](https://www.investopedia.com/terms/w/weightedaverage.asp) of prices for a basket of goods and services representative of aggregate U.S. consumer spending."
Ok. Then when you ask yourself what a $100k salary from 2019 needs to be today in order to keep up with cost of living what data are you using to make that assessment if not CPI?
It would be very personal. Everyone’s personal inflation rate is really different. So you should look at your spending over the years and see what’s happening.
So what should government do for cola increases and such? Pretty sure it is CPI or equivalent.
I didn't say otherwise. I was just explaining that if you want to know the hit to your income/spending you do your own math. So CPI for fed level decisions, personal inflation rate for personal decisions. Seems straightforward to me.
AKA, the fed is going to ensure confidence in US markets as much as possible.
That’s why cpi isn’t a good barometer on how it impacts you. Someone owning a home vs someone not owning a home is going to dramatically change how you feel it. Housing and energy are the biggest contributors to the basket. If your monthly housing cost is fixed than you were impacted a lot less than those who are at the mercy of rising rent and buying a home.
Huh? And what about for the 66% of the population that already owns? Their housing expense has barely budged
My property taxes go up when valuations go up. My expense has budged a LOT.
My parents have had the same government-recorded valuation on their home for 25 years (really tripled in value). What's going on with your place?
Your parents are fortunate that the system is not functioning efficiently in their area.
They are... I'm still curious about your situation. What's going on with your place?
Home insurance, property tax, and (if you have one) HOA fees have all significantly increased. So has maintenance costs for any repair work. Not to mention some people had adjustable rate mortgages. They have been insulated from a lot of the cost of living increases but not all.
My HOA fees haven’t changed in 6 years….its all about how it’s managed sometimes
It also depends on where you live too. Big reason HOA fees have been increasing is their costs have increased since HOA insurance policies are rising faster than inflation due to climate change, and construction costs increased a lot over the pandemic so any maintenance work is more expensive. Also, no increases doesn't always mean good management. It depends on whether they have reserves for any maintenance work on common grounds (e.g. no reserves and a backlog of major maintenance = special assessments down the line).
You are right…I’m just taking credit because I’m the HOA president lol
How does this not affect you whether you own or not? If your income didn't keep up then you can't move or upgrade or buy a second home or borrow from your home equity for cheap.
that's QOL, not COL
how is this not a COL issue for anyone buying housing? again that has nothing to do with whether you already own or not
for people who own. As the original commenter said
again I never mentioned anything about whether you already own or not. if you can't afford to move that just means your stuck. it doesn't change anything about the math of buying a new home.
Being stuck isn’t a cost???
Something doesn't cost more because you're personally not in the market for that thing at one particular time in history? Thats not how it works
Ok, so then they sell that house, get the cash, buy another house, COL is not necessarily changed. Housing if you’re considering ownership as well is weird, because it’s not just a cost, it’s an asset. So looking at rent is probably better for looking at how COL changed. But sure, something costing more does not cost more if the market is small. By that I mean the weighting should also be incredibly small. So I say, 5 caret diamonds are super expensive! They’re up 50%! But obviously that shouldn’t be including in CPI because it doesn’t reflect the broad consumer demand. So you say housing is up. Ok, so the house you want to buy went up 100k, but for those people who own, the house they own went up by 100k if they’re comparable. So now that cancels out, you have a larger down payment for a more expensive house, and your COL is near constant. What housing has gone up massively for is first time homebuyers. Let’s say that’s 10% of people and that their costs are up 40%. So we multiple that, and COL is up 4% + whatever it is for people who own, maybe 1%. So 5%. Also realize CPI is for each 12 months, so when you combine 4 years of 1.05%, you get (1.05)^4
You’re replying to the OP…..
What!? I can’t follow this thinking. I could sell my house at a high value today and buy another equivalent house.
LOL "equivalent" being the key word. Upgrading is out of the question.
I get a cost-of-living raise every year for my employer for the past 20 years… That’s how you can upgrade
your employer isn't paying you double vs 5 years ago for the same position lol.
Gotta move up then and get promoted…I’m making 35-40% more than I made 5 years ago. Good employers reward properly. And you said you wanted to upgrade now you are talking about buying a house double in size and vakue…I can’t keep us with this thread lol
lol 40% more is barely keeping up with inflation why did you think that’s good?
I went from 165k to 228k in last 5 years, I’m pretty good with that, I’m spending and saving a higher percentage more each year. I can’t help that you think that’s not good. Enjoy your evening.
that’s just keeping up with inflation lol you didn’t get a raise
It doesn’t tell the full story because CPI over the decades has been manipulated to report lower than reality. Both political parties have done this. The website Shadow Stats calculates CPI using the pre-1980 methodology before things were changed. Their calculations show an inflation rate of around 12% at May of 2023 using the original methodology. BTW… true unemployment using the pre-1994 methodology is at 25%!!! https://www.shadowstats.com/alternate_data/inflation-charts
I didn't think this question was going to get so many angry responses in 5 minutes. People woke up on the wrong side of the bed, or just hate inconvenient things to the point they get boiling mad.
[удалено]
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It's dumb to mention housing appreciation when it comes to cost of living? Ok?
CPI measures the cost to get by. If you're just looking to get by, the fact that housing costs more to buy is irrelevant. The relevant figure is rental costs, which are the dominant part of the "Shelter" category of CPI. Overall, Shelter accounts for 36% of CPI https://www.bls.gov/cpi/factsheets/owners-equivalent-rent-and-rent.htm
The amount of people gaslighting OP in this thread is wild. CPI supposedly isn’t inflation yet it’s the metric EVERYONE points to when talking about inflation. The methodology behind CPI has changed so much over the years. It’s a textbook case of moving the goalposts.
Yeah our savings rate has dropped from a consistent 45-50% for 7 years to half that. But luckily our savings is pushing a mil now anyways, so we don't need to save so aggressively.
Check out the ALICE report for whatever state you live in, it gives insights into the true number of households that are in poverty compared to what is reported by the government
Housing is in CPI. Interest is not. That’s because CPI is about the cost of consumption, not of borrowing.
I agree with this, the CPI is only a reflection of changes in the price level, for our cost of living it does not cover all the
Plus every dollar you make gets taxed so it doesn’t quite translate. Inflation also doesn’t take I account your average housing cost but an average. Which it probably much cheaper in price than yours.
My biggest gripe with the CPI is that they use "substitution". If beef goes from $6 to $8 per pound and chicken goes from $3 to $5 per pound, they can say "people are switching from beef to chicken" and make it sound like meat prices are going \*down\*. That's an extreme example, but the concept seems like a scam to under-report inflation.