Hacker News Reader

Yeah it's insane these simply facts are completely devoid of any discussion.

Inflation as we talk about it colloquially is supposed to measure price changes of the same thing. Like an apple. What actually happens in most discussions is that we measure wildly different things and then say 'look, prices changed'.

Not just have homes gotten bigger, the heating and cooling is better, they're safer, they're equipped with more amenities etc. My grandparents didn't have a shower, but went to the communal bathhouse once a week. My parents didn't have central heating in one of their homes.

I see the same discussion in healthcare. Life expectancy in many western countries grew by 20-30 years since the second world war, which is a radically improved outcome which proxies health throughout life, yet we are shocked this outcome is much more expensive than before.

College is trickier, there's tons of inflation there and you can wonder if education really improved. By some measures, it worsened, by some it's much better. What's clear however is that educational attainment has never been higher.

That's not to say there's no inflation in any of these areas. But rather that it's much more nuanced if corrected for some values.

I see the same discussion in healthcare. Life expectancy in many western countries grew by 20-30 years since the second world war, which is a radically improved outcome which proxies health throughout life, yet we are shocked this outcome is much more expensive than before.

There’s been more than 300% increase in the last thirty years. How much better off are we health wise than 1990? 1945, sure, but 1990?

What you are arguing against is a classic smoke and mirrors job where two unrelated things are linked together. If you look outside the US you see similar huge gains in life expectancy. Which are 95% due to basic public health measures.

Seriously:

Life expectancy Cuba: 79.18 years.

Life expectancy US: 79.11

I don't live in, or look at exclusively at the US. In western europe for example there've been massive increases in healthcare costs, too. These are socialised, citizens don't pay them through their insurance package, but they're paid by society (citizens) through taxes for sure. And these have created large gains.

Cuba is a poor example because it prioritises health over everything else. That's not a value judgement, rather that it's just an outlier. If you mandate in a dictatorial government that people should be doctors and work for a humble salary, then of course you'll see good healthcare outcomes for little money.

> These are socialised, citizens don't pay them through their insurance package, but they're paid by society (citizens) through taxes for sure.

This isn't true for much of western Europe which doesn't have a single-payer model. Subsidies and regulations are more abundant than in the US, certainly, but for example everyone where I live in western Europe has to pay out of pocket for insurance premiums and deal with deductibles, etc.

Only those that never lived under communism would believe those numbers. Same as the information on the coronavirus from China.

https://www.econlib.org/about-that-cuban-life-expectancy/

You can make a similar argument that Cuba and China's literacy rate is very low because they're communists.

You can argue anything you want. I just don't believe the numbers reported. Not for healthcare in Cuba, not the virus in China. And literacy rates in communist countries were made high so kids will be indoctrinated into Lenin as quickly and thoroughly as possible. That's the only reason.

Sure if you just pretend, anything's possible!

Your article begins with: "Wealth and health are correlated because greater wealth can buy better health care."

Wealth is not the only way to obtain good health outcomes, Cuba has a ton of doctors and they don't get paid massive, overwhelming salaries. Just because they don't get paid outsized amounts doesn't mean they're bad at their jobs.

Based on all the OECD charts, there's very much a point of diminishing returns re: spending on healthcare and outcomes -- and very much so re: life expectancy. [1] It's pretty clear that spending 8X as much money didn't make people live 8X longer.

[1] https://ourworldindata.org/the-link-between-life-expectancy-...

I lived in the most prosperous communist country and I know for a fact that the numbers reported are lies. You are free to believe whatever you want since you haven't established the need for skepticism in this sphere. But when lied to often enough, folks like me KNOW were being lied to. Cuban healthcare is that perfect lie the ignorant fall for.

Agreed, the change is much less significant. Yet I was surprised that healthcare outcomes continued to improve during this time. Life expectancy has grown by almost 4 years since the 1990s, that's absolutely not insignificant. And there's good reason to believe that healthcare interventions have strongly improved, but that baseline health is much worse. Even stable healthcare outcomes would, if this is true, be evidence for interventions having improved. If you look at obesity levels for example (just google the charts), they're absolutely ridiculous and create a much larger burden (and cost) on healthcare interventions for the same outcome (e.g. life expectancy).

The corollary is of course also true, which is that healthcare has improved due to many interventions not typically financed through healthcare costs / insurance. e.g. public health campaigns to stop smoking.

By some measures housing is not as good: UK houses have shrunk from the days of the Parker-Morris standards.

>> The dot-com bubble only took 10% off the average house price in SF. The 2008 mortage crisis took 27% over the entire time period -- which was followed by an 88% increase.

> My grandparents didn't have a shower, but went to the communal bathhouse once a week. My parents didn't have central heating in one of their homes.

So what are you saying? In 2008 people started throwing out their showers, and a few years later they built in jacuzzis with disco lighting, and that explains these wild swings?

No? You're looking at an extremely local level at SF, which is obviously influenced by the tech industry which is hosting some of the world's largest companies like Apple, who's revenue tenfolded since 2007.

If you look at median home sales prices in the US in general however, you get this picture (just compare the peak of 2007 till today):

https://fred.stlouisfed.org/series/MSPUS?utm_source=series_p...

I'm not seeing an 88% increase. Now if you correct that picture for median household income in the US, for the same period:

https://fred.stlouisfed.org/series/MEHOINUSA646N

You'll see, income-adjusted home prices haven't shot up that much since the last peak.

Then you have to contextualise further, and look at interest rates. After all, you're not buying homes in cash. For almost all of us, when we 'buy' a home, we're really just signing a rental contract for cash (a loan), and our housing costs consists of servicing this loan, the mortgage payments. The principal sum matters of course, which went up as prices grew, but so does the interest rate, which is at a historic low and responsible for the prices growing. You can't just ignore interest rates.

So if you actually look at monthly payments, which is by definition corrected for interest rates, and correct that for income increases, really what we talk about when we say 'housing costs', really isn't anywhere near the record levels usually talked about in the media, discussion forums etc.

And THEN you correct that for the larger homes etc.

Now I tried to give a longer historical perspective of price increases for a few generations beyond mine, but if you want to nitpick that and make a joke about jacuzzis, fine by me.

My point is that if we break down what a 'change in housing costs' really should mean, we typically want to talk about:

income-adjusted, monthly (periodical) cost for a square foot.

What we tend to do is: ignore the fact our incomes rose greatly in nominal terms, yet express increases housing in nominal terms, ignore interest payments dropping for decades reducing the costs to finance these homes, and then ignore the fact these homes have doubled in size in the post-war era and typically have much better amenities.

And that's not a fair representation, I think.

> for the same period

One of the links you posted goes from 1963 to 2018, the other from 1984 to 2019. Not the same period. For the record, comparing the values for 1963-01-01 and 2018-01-01 gives an increase of 2.8x in median income and 4.2x in median house price sales. You're right that other things like amenities and house sizes might factor into this in some way, but I doubt that explains everything.

It's especially interesting to note that median incomes from 2007 to 2008 did not decrease, and only decreased about 2% from 2007 to a local minimum in 2010. Yet house prices decreased by 19% from a local maximum in Q1 2007 to Q1 2009. You will find it very hard to argue that that had something to do with a very sudden shift to smaller/less well equipped homes.

I find it a lot more likely that the main reason is speculation. Yes, including speculation related to interest rates.

> For the record, comparing the values for 1963-01-01 and 2018-01-01 gives an increase of 2.8x in median income and 4.2x in median house price sales. You're right that other things like amenities and house sizes might factor into this in some way, but I doubt that explains everything.

It actually does, the link I provided shows the average square footage went up 50% from 1600 sqft to 2400. This accounts perfectly for the difference you cited (4.2x is 50% larger than 2.8x).

> It's especially interesting to note that median incomes from 2007 to 2008 did not decrease, and only decreased about 2% from 2007 to a local minimum in 2010. Yet house prices decreased by 19% from a local maximum in Q1 2007 to Q1 2009.

Not sure if you heard there was a mortgage crisis with tons of defaults ravaging neighborhoods. Macroeconomic conditions were responsible there. The entire market for lending and consequently for housing broke down.

> It actually does, the link I provided shows the average square footage went up 50% from 1600 sqft to 2400. This accounts perfectly for the difference you cited (4.2x is 50% larger than 2.8x).

The article at https://www.supermoney.com/inflation-adjusted-home-prices/ talks about the sizes of "new homes" that have increased in this way since 1979. But the median price increases seem to take into account all home sales. If most homes sold are not "new", then the comparison is invalid. For example, if 80% of homes sold in this period were not new, then "total square feet sold" only increased by 20% of 50%, i.e., 5%. Indeed it is an easily observable fact that the prices of old houses and apartments go along with general price rises in an area. Without the old house's size changing.

> Not sure if you heard there was a mortgage crisis with tons of defaults ravaging neighborhoods.

I did hear. And this showed that at least 20% of a home's sale price is not determined by its value as measured in units of surface area. Rather, it's a vulture economics seller's market in which prices are determined by what people are able to pay for a necessary good, not by what is a fair price for that good.

> But the median price increases seem to take into account all home sales. If most homes sold are not "new", then the comparison is invalid. For example, if 80% of homes sold in this period were not new, then "total square feet sold" only increased by 20% of 50%, i.e., 5%.

Yep, good point.

> And this showed that at least 20% of a home's sale price is not determined by its value as measured in units of surface area. Rather, it's a vulture economics seller's market in which prices are determined by what people are able to pay for a necessary good, not by what is a fair price for that good.

IMO what it showed was that house prices are dependent on people's ability to obtain financing, and when the financing market ground to a halt, people weren't able to obtain the leverage necessary to sustain the price point. That doesn't mean anything about the intrinsic value of the home, IMO.

2008 is not a good example because there was fundamental, structural problems in the market facilitating such transactions. I think the dot-com pop was a much better comparison because there were no structural issues fundamental to the market but rather a drop in desirability.

> and frankly, the chances big tech is going to cut pay is below zero.

I doubt this. It is not like Google/Facebook are not affected by the market downturn. When recession comes, advertising is the at the frontline to be cancelled.

Sure, but Apple has $200B in cash, Facebook has $52B and Google has $117B. These are some of the most revenue efficient companies in the history of the world. Why risk jeopardizing that by cutting wages and potentially losing your biggest asset? I don't think they cut any pay in 2008, and Apple didn't even have a single round of layoffs. In fact I recall Apple making a bunch of strategic acquisitions at the bottom of all that.

"cash"..

"words"..

> I'm not entirely sure that it's drastically priced out of line with history. The price per square foot of the average American home, when adjusted for inflation, is almost exactly the same as in 1978 -- right around $130. What's changed is houses have gotten bigger (1600 sqft vs 2400). [1]

Unfortunately, a buyer can't get a 33% discount by only buying 66% of the house.

> Unfortunately, a buyer can't get a 33% discount by only buying 66% of the house.

I think we both know you can :) you can either buy a larger house and portion off an in-law unit, which you can then rent. You could buy a smaller house. You could even build on a fresh plot of land.

> you can either buy a larger house and portion off an in-law unit

Wouldn't that make it even more expensive to buy the larger house? You have to get the larger mortgage and pay to remodel the home on top of that. Plus I'm pretty sure there can be zoning restrictions on turning single family homes into multifamily buildings.

> You could buy a smaller house.

If what you claimed is correct [1], then that implies that smaller houses are relatively scarcer than they were in 1978, and thus harder to find. Just "buy a smaller house" isn't actionable advice if the houses available to buy are larger.

[1] The price per square foot has stayed constant adjusted for inflation, and the price increases are due to houses "getting bigger."