Reply to There is no housing crisis in MoCo or most of the DMV for that matter

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[quote=Anonymous][quote=Anonymous]Context for this thread: [url]https://homebay.com/inflation-housing-market/[/url]
"To understand just how expensive homes have become, let’s run through some comparisons on what our childhood homes would cost today.

Spending $100,000 on a home in January 1990 would equate to spending $377,724 on a home today. For everyday living costs, $100,000 spent on goods and services in 1990 would require $231,081 to get the same amount of goods today.

Spending $100,000 on a home in January 2020 would equate to spending $142,249 on a home today, while spending $100,000 on goods and services just three years ago would require $113,739 today."[/quote]

Using national median home price doesn't account for difference in stock (larger homes, higher level of appliances, code-related and materials improvements).  That rolls forward both with new home sales (direct new construction) amd with dwelling upgrades/additions/replacements.

Even using Case-Shiller indices, which try to track same-property sales, would not provide a proper measure for comparison to non-housing inflation because the nature of communities in growing MSAs changes, and that contributes to home value.

Would the experience of living in Garrett Park in 1990 be close to the experience of living in, say, Derwood today?  It wouldn't be the same as living in Garrett Park today, as insular as that community might be.  Meanwhile, a 5 pound bag of sugar today provides much the same experience as was the case in 1990.

On top of that, the way housing purchases are financed provides its own underlying variation to demand, and then valur/prices.  Down payment requirements are typically less than in 1990, resale holds greater after-tax gain due to enacted exemptions, etc., etc.  This is among the reasons that they use "owners' equivalent rent" in inflation calculations, but that, itself, wouldn't take into account housing stock changes well enough, and certainly not community-experience change or financing-value change, to get to a bag-of-sugar to bag-of-sugar analysis of the relative necessary burden of housing from one decade to another.

For the record, the change in OER in US cities (includes areas around cities) from 1/1990 to 1/2024 was about 185% compared to the 142% for all CPI (presumably the 131% noted above was CPI ex-housing, and likely the better comparator).  This is much less than that 277% increase in national median home price, and within some amount of reason when considering the unaccounted factors noted above.

Much greater inflation has come in medical services (a disastrous consequence of the system shifts from the late 80s onward that introduced significant middle-man costs at great profit to insurers), tuition and child care (both huge suppy/demand issues).[/quote]

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