Inconsistency in House Price Data in Talks

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RayTomes
Status: Bronze Member (Offline)
Joined: May 20 2009
Posts: 67
Inconsistency in House Price Data in Talks

1. It has been stated that the price of housing in USA divided by CPI was relatively stable for a century and then raced up to double that value. I too noticed this fact a few years back and saw it as a huge anomaly. I also noticed an 11 year cycle in the graph and predicted a low in 2008 as a result.

2. It has been stated that the CPI has been fiddled and the evidence given is based on the site http://www.shadowstats.com/alternate_data which shows a gradual divergence from 0% per year in 1983 until 8% per year by 2008 and looks to average a 4% per annum difference. That amounts to 25 years at an average rate of around 4% per annum. I make that 1.04^25 = about 2.67 times that the true CPI is of the stated CPI.

3. If these two "facts" are both true, then compared to the period from 1880s to 1980s, the 200 index in housing/CPI is really 200/2.67 = 75. In other words housing prices were at a very low level in 2005 (at depression levels in fact) and are even much lower now. This is an extremely different conclusion to the one made, that housing prices were inflated by cheap 1% loans.

The government have been accused of using two different prices for a computer depending on whether they are calculating CPI or GDP. However are you, Chris, not using two different CPI values depending on whether you are looking at real incomes or real hhousing prices?

 

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