A Final Word on Housing Costs and the CPI

For anyone questioning the methodology used in my previous post today, please take note of the following chart. It is generated directly from BLS data using the database query at CPI home, and it tells the story all by itself.

This link will take you directly to the query page, and after a little fiddling with formatting options, you get this:



Shelter includes the following subcategories and weightings (as of 2003):

• 19% - Rent of Primary Residence
• 1% - Housing at school, excluding board
• 9% - Other lodging - hotels and motels
• 70% - Owner's equivalent rent of primary residence
• 1% - Tenant's and household insurance

Something very significant happened in 1983 when owner's equivalent rent replaced the previous inflation calculation for owner-occupied housing. The older data, using the previous calculations for owner-occupied housing, is not available via the BLS, but it is clear that it would closely follow the above curve pre-1983, given the make-up of the shelter category.

Falling interest rates do not explain the low and stable shelter inflation on this chart.