[quickthrower2]

I find it interesting that house prices are kept out of inflation. But if you are forced to rent forever due to unaffordable housing, in your later years you might be paying $3000/m rent instead of $0/m mortgage interest. But that fact is conveniently left out.

[amacneil]

Article you may enjoy:

Why the government took home prices out of its main inflation index

https://fullstackeconomics.com/why-the-government-took-home-...

[quickthrower2]

Interesting: I think a key point about that is in the US your long term fixes allow you to really have a higher house price and lower interest rate and show it costs no more. In Europe etc. this isn’t the case so you can pay the boom price then get hit by interest rate rises.

It is always better to get the lower price higher interest combo though if you can afford to overpay as it reduces the term more effectively due to compounding.

Also the lowering interest rates are a one way street so the people getting in at the older higher interest rates get more equity for doing nothing as the lowering interest rates increase house prices. The latecomers just get more risk of negative equity.

Nimbyism and insufficient new building is another topic!

[lottin]

If you want to make an informed decision, you have to consider the entire period not just the later years.

[onlyrealcuzzo]

37% of the 65% of homeowners own their home free & clear.

That's 24%. You're obviously at a huge advantage if you're in this 24% - but it's kind of like saying that the top 10% of people have >$1M in assets (they also happen to predominantly be old).

[quickthrower2]

The point is that the concentration of housing wealth becoming more concentrated means the average person (median) is worse off and their cost of living has increased accordingly.

[amacneil]

Surely the people who are leveraged with a fixed rate mortgage at an even bigger advantage to those who own a home outright? (debt will get inflated away over time)

[quickthrower2]

If you have 500k house outright vs. 500k equity in 1M house then probably yes I imagine that is correct on average.

But that is orthogonal. Both people in the comparison have the home equity to begin with. How? Either they paid $500k from earnings or they got it a lot cheaper in the past. A lot cheaper in the past == inflation.

[throw0101a]

> I find it interesting that house prices are kept out of inflation.

> The reason, as I understand it, is that shelter costs are kinda funny in how they are added to this statistic.

Housing prices are not considered in the CPI ("cost of living") because houses are mostly an asset:

> 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/

The "C" in CPI stands for consumer. Houses aren't in the CPI for the same reasons stocks and bonds are not: we don't consume them to live.

'Shelter' is considered in the CPI generally though:

* https://www150.statcan.gc.ca/n1/pub/71-607-x/2018016/cpi-ipc...

And in that you have mortgage payments: yes prices are up, but rates were going down recently, and are low by the standards of the last ~40 years.

> But if you are forced to rent forever due to unaffordable housing, in your later years you might be paying $3000/m rent instead of $0/m mortgage interest. But that fact is conveniently left out.

Rent is often cheaper than mortgage payments, and is very more often cheaper than mortgage payments plus the cost of maintaining a home. If you take the difference and investment you can have just as must equity in a few decades. Preet Banerjee goes over the math in this ten minute video:

* https://www.youtube.com/watch?v=KAMeI4uHAFE

He rents:

* https://www.speakers.ca/2013/10/preet-banerjee-sold-his-hous...

If you want to know when it makes financial sense, the "5% Rule" by Ben Felix is a decent place to start:

* https://www.youtube.com/watch?v=q9Golcxjpi8

* https://www.youtube.com/watch?v=Uwl3-jBNEd4

Until recently he was a renter, but purchased a house 1-2 years ago. Not exactly happy with the decision:

* https://www.youtube.com/shorts/L5SAF0SHD1w