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OER is to Bernie Madoff as...

Tuesday, February 24, 2009

Don Fishback over at Seeking Alpha has taken notice of the disturbing consistency of the owners' equivalent rent component of the Consumer Price Index and files this report.
IMAGE Yes, Don, the numbers look a little too good, don't they?

That is, unless you were some wacky group of economists who were looking to allow actual home prices to rise to whatever level they can be pushed to with decades of easy money, but also wanted to see a low inflation number.

Then it would look just right.

Interestingly, yours truly seems to have almost cornered the market on Owners Equivalent Rent as a search term as shown below:
IMAGE Thinking way ahead here, maybe that should be added to the list of candidate phrases for my obituary/tombstone - "he was more relentlessly critical of the Labor Department's use of owners' equivalent rent in the inflation statistics".

Maybe not..


Anonymous said...

From Fishbeck
"That’s a decline of 25%. During the same time period, the home price input into the CPI calculation is UP +6%."

yes, but during that period RENTS actually were rising. I don't mean "owners equivalent rent", I mean the cost of renting a house or apartment plain and simple. So it does make sense the CPI housing portion would differ from the decline in housing prices (rents affect the cost of living of tenants for sure), just not by as much as it did differ.

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