Re: CPI Composition
[ QUOTE ]
This is interesting. I would have thought that the reason health is so high relative to transportation and recreation is because of the monthly insurance payments that have to be paid. But health insurance is actually a minuscule cost relative to everything else.
Why, instead of house prices, do they list, “Owners Equivalent Rent of Primary Residence”? Housing prices have soared recently, but for some reason this information isn’t included in CPI.
[/ QUOTE ]
as i understand it all of these things are derived from survey questions asked of home-owners or home-rentors.
in order to "level" the field of these two groups, they ask questions like "how much rent do you pay each month" of rentors and "how much could you get if you rented your home right now unfurnished?"
so "owner's equivalent rent" does include owned homes, just normalized to monthly rent (i.e. to try to capture the "cost of living in a home" question)
this is reflected if you look back in time at the contribution of this #. there was an increase (far less than the overall "median housing price" increase) from previous CPI RIs to this one.
one reason is simply due to calculation. the "average" owners equivalent rent would likely be far different than the "median" owners equivalent rent.
Barron
|