tag:blogger.com,1999:blog-1110014885778996459.post279915953045090194..comments2024-03-28T01:12:29.954-07:00Comments on Idiosyncratic Whisk: Housing Tax Policy, A Series: Part 30 - Secular Stagnation, a Housing Bubble, and Loose Monetary Policy can't all be true.Kevin Erdmannhttp://www.blogger.com/profile/07431566729667544886noreply@blogger.comBlogger5125tag:blogger.com,1999:blog-1110014885778996459.post-21802719190034801262015-04-30T07:08:25.934-07:002015-04-30T07:08:25.934-07:00Thanks, Kevin. I think I'm following.Thanks, Kevin. I think I'm following.<br /><br />Kenneth Dudahttps://www.blogger.com/profile/10593455504357461005noreply@blogger.comtag:blogger.com,1999:blog-1110014885778996459.post-50403366023438886342015-04-29T07:43:20.381-07:002015-04-29T07:43:20.381-07:00Good questions, Ken.
It's number 2.
The BEA ...Good questions, Ken.<br /><br />It's number 2.<br /><br />The BEA keeps data on both real and nominal expenditures, so the first graphs are directly from those measures. Shelter-specific inflation would reflect the difference between those measures for shelter-related spending. I am being a little loose here, because I think changing consumption patterns and inflation levels might lead to some distortion of real spending as I am showing it, especially as you move back in time. But, the scale of any distortions shouldn't change the main consumption patterns I am talking about.<br /><br />The best way to look at it, I think, would be to imagine an average household, as renters. For simplicity, let's say their nominal and real income remains the same. Rent inflation is the change in the rent they are paying on their house (in a zero income growth environment). A real increase would mean that they moved to a more expensive house (maybe larger, maybe closer to downtown).<br /><br />In a world with changing incomes, we can imagine a second step, that when their real income increases, they move to a slightly better house (larger, better location, etc.).<br /><br />For the past 30 years, the average household has been paying the same rent (relative to their income), but has been moving to a slightly smaller (or otherwise less valuable) house each year.Kevin Erdmannhttps://www.blogger.com/profile/07431566729667544886noreply@blogger.comtag:blogger.com,1999:blog-1110014885778996459.post-82891010098803681562015-04-29T06:48:27.365-07:002015-04-29T06:48:27.365-07:00Kevin, sorry to be clueless, but I'm finding t...Kevin, sorry to be clueless, but I'm finding this hard to follow because I'm not sure what you mean by "real rent" or "real housing expenditure". I can imagine at least three ways to define "real rent":<br /><br /> 1) nominal rent divided by some general-purpose deflator, such as the GDP deflator or the PCE deflator or the CPI deflator;<br /><br /> 2) nominal rent divided by a shelter-specific deflator, e.g., build an estimate of shelter inflation and divide by that;<br /><br /> 3) rent measured in some non-dollar way, such as square feet; i.e., real rent expenditure is increasing if people are renting more square feet per household.<br /><br />Which is it? Does it matter? (It strikes me that #2 and #3 might be the same thing expressed in different units, so it wouldn't matter if you picked #2 or #3, but #1 could be much higher than #2 if, say, supply constraints were forcing renters to bid up rents of the existing housing stock.)<br /><br />Thanks,<br /> -Ken<br /><br /><br />Kenneth Dudahttps://www.blogger.com/profile/10593455504357461005noreply@blogger.comtag:blogger.com,1999:blog-1110014885778996459.post-25845126803120665112015-04-28T19:13:19.488-07:002015-04-28T19:13:19.488-07:00That might give some meaning, but a studio in Manh...That might give some meaning, but a studio in Manhattan and a 2 level castle in flyover country could both have the same value - and both be homes that are built in a functional economy. So, I think there is limited value in thinking about it that way. Local limits to building in the high cost metro areas definitely skews housing to less valuable areas, though.Kevin Erdmannhttps://www.blogger.com/profile/07431566729667544886noreply@blogger.comtag:blogger.com,1999:blog-1110014885778996459.post-71040876396597034912015-04-28T18:48:41.217-07:002015-04-28T18:48:41.217-07:00As always, thought-provoking. What about sf of hou...As always, thought-provoking. What about sf of housing per capita? Useless? We may have houses where we do not need them, in the Midwest. Benjamin Colehttps://www.blogger.com/profile/14001038338873263877noreply@blogger.com