Hacker News Reader

Comment by arbuge | Hacker News Reader

> The median home price of an existing home stood at just $278,200 in August 2019, according to the National Association of Realtors. That figure has since spiked to $407,100 as of August 2023.

“Talk about a bubble. That’s a classic supply-demand imbalance,” Bair told CNN in a phone interview.

Is it really a bubble though? How much is $278k adjusted for inflation since August 2019?

And if there's really a "supply-demand imbalance", wouldn't that be a further justification for the current prices? I assume she means too little supply for existing demand.

View on HN

Approximately $333k after 20% inflation over the period.

https://data.bls.gov/cgi-bin/cpicalc.pl?cost1=278200&year1=2...

Yes, I think you are right to frame it as a supply shortage. The prices might be rational, eg not a bubble, considering how many people want houses and how few have been built.

Compare Tokyo. [1]

> In the past half century, by investing in transit and allowing development, the city has added more housing units than the total number of units in New York City. It has remained affordable by becoming the world’s largest city. It has become the world’s largest city by remaining affordable.

> Two full-time workers earning Tokyo’s minimum wage can comfortably afford the average rent for a two-bedroom apartment in six of the city’s 23 wards. By contrast, two people working minimum-wage jobs cannot afford the average rent for a two-bedroom apartment in any of the 23 counties in the New York metropolitan area.

[1] https://www.nytimes.com/2023/09/11/opinion/editorials/tokyo-...

Made this comment elsewhere, but CPI is partially derived from the cost of housing, so you can't really use CPI here.

I like the way you think.

Here's CPI for All Urban Consumers: All Items Less Shelter in U.S. City Average. [1] Index level in August 2019 234.853 Index level in Sept 2023 280.869

An increase of 20%. Very similar to overall CPI.

So rent hasn't kept up with housing prices? Some other anomaly in the calculation of CPI?

[1] https://fred.stlouisfed.org/series/CUUR0000SA0L2

hey thanks nuclearnice3! I like the way you think too

there were two questions. perhaps, opine, as an expression of your gratitude.

Note that Japan's population is not growing, though i'm not sure how the Tokyo region compares.

Maybe not the case in Japan, but I think a more important metric is household formation and sqft demand per person. NYC population declined during and after the pandemic, but household formation rose, leading to increased demand.

https://x.com/ModeledBehavior/status/1646151980966879232?s=2...

Large cities in Japan generally grow while the countryside shrinks. Kids don't want to live in boring towns with no work.

The housing itself is also cheaper. For example, indoor hallways in apartments are considered luxury.

i was reading somewhere that it's the rural areas in japan that's depopulating, because all the young people are moving to larger cities in search for economic opportunities.

So while the population of japan is declining as a whole, the metro areas are growing in size.

> "Talk about a bubble. That’s a classic supply-demand imbalance," Bair told CNN in a phone interview.

What's insane is that the mad emperor (the Federal Reserve) is hell bent on making sure there is no labor power in this world, to the degree that they are willing to make the bubble vastly vastly vastly worse for a long time.

No one will sell unless they have to, for a long long time. Home builders are giving up, since borrowing money is so much more unaffordable.

The Fed is making everything vastly worse & will continue to do so as long as regular people can get jobs and make money. They'll only stop after they break the economy.

If you include housing in your inflation calculations, it's pretty well definitionally equal.

Idk if the current prices are properly justified. They make sense given that most people don't want to sell with their current 30 year interest rates set so the supply is low, and anyone who does, needs to account for their new interest rates.

Eh, can't bother to run the numbers youself?

$278k in August 2019 has the same buying power as $333,512.66 as in September of this year.

It's more complicated than that since the cost of housing is included in "official" and unofficial inflation numbers (33% of US Consumer Price Index is housing). So multiplying by the inflation rate and comparing to the current market is circular. A better indicator might be the inflation in the money supply over that same period, but idk I am not a finance guy.

The CPI also shows what categories within it have moved. It would take more effort to calculate since none of the calculators online have that option, but it could be done.

What does the inflation rate look like if we don't include real estate?

The best source I found so far is this one from The White House[1]. It claims that

> housing’s contribution rose to 2.6 percentage points, making up half of annual CPI inflation.

[1] - https://www.whitehouse.gov/cea/written-materials/2023/04/27/...

> It's more complicated than that since the cost of housing is included in "official" and unofficial inflation numbers (33% of US Consumer Price Index is housing).

No, the costs of homes-as-assets is not included in CPI (the cost of housing-as-a-consumed-service, rent, either as paid by renters or as foregone by resident homeowners, is.)

> So multiplying by the inflation rate and comparing to the current market is circular.

No, even if it was a CPI component (as all consumer goods are), it would still be correct to use the whole CPI to get its inflation adjusted price.

> A better indicator might be the inflation in the money supply over that same period

No, while money supply changes have an effect on consumer prices, if you are looking for a price deflator for purchasing power equivalence, the CPI or other broad price index (PCE, etc.) is a much better choice, even for consumer goods that will be components of the index.

Doesn’t matter if too few can afford to purchase it because of interest rates.

Exactly. Lower prices will appeal to corps and folks who can pay in cash long before anyone else can afford the same price.

Reply on news.ycombinator.com