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by JumpCrisscross 6 days ago
> it assumes rental price and housing costs are somehow linked when in reality asset prices have far outstripped rent

It's pricing the cost of shelter. Renting a home is buying shelther. Buying a home is buying shelter and buying a financial asset. OER is the way you separate the last two components. Otherwise, you'd have to only look at rents to determine housing prices, which would be rubbish in a country where most households live in homes they own.
2 comments
jhallenworld 6 days ago
Suppose you want shelter. It used to be that you could buy a house for a reasonable price and move in. But now that's unaffordable, so instead your have to pay rent. In CPI thinking these are equivalent forms of shelter, but I bet if you asked most Americans, they would not agree with you.
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JumpCrisscross 6 days ago
> But now that's unaffordable

Which flows through to owner-equivalent rent, in part.

> In CPI thinking these are equivalent forms of shelter, but I bet if you asked most Americans, they would not agree with you

It really doesn't. When measuring rent, you directly measure rent. For OER, you're measuring the housing price and imputing shelter cost from that. They're similar, but different. Sort of like how renting and owning are similar, but different.

Also, given the variance in housing affordability across the country, you'd almost certainly have to strip out any financial-asset component anyway to meaningfully compare the resulting number.

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throwwwll 5 days ago
>Renting is buying

American education.

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