US inflation rate rides on a made up number

A big part of the inflation rate is the “imputed rental value” of an owner occupied home. Since I own a mortgage-free home in an area with low property taxes, my actual monthly out of pocket cost is about 20% of the home’s market monthly rent. Housing price and rental inflation isn’t affecting me. If the US didn’t do this, and calculated inflation the way Europe does, our current inflation rate would be 3% instead of 5%.



I can’t read the article due to paywall, but it wouldn’t make sense to leave that as part of the calculation if that is more representative of how most live with either a mortgage or rental? Singapore’s inflation is 5.5% at the moment but not even close to what I am feeling as my rent just went up 38% which was already my largest expense. But they don’t could it went calculating inflation.


Without the link.


On average, housing costs make up about a quarter of US incomes so they can’t be ignored. What is the suggested change?


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The unemployment numbers are done by statistical survey - actual phone calls to people. How about using that advanced technology to find out if your housing costs have increased since a year ago. Those with mortgages would easily say “no”, and those in rentals would say “not yet”, except for those who had just gotten an increase.

Too complicated?


It seems that’s what they do now.

In the housing survey, the BLS collects the prices of 50,000 residences through personal visits or telephone calls. If a housing unit isn’t rented but is owned by the resident, they use what is called the owners’ equivalent rent: the BLS finds what it would cost the owner to rent a similar place and uses that as the price for housing instead. Since rentals do not change frequently, the rent of each unit is sampled every six months, allowing the BLS to survey more houses overall.



I did not known that, but it seems odd to ask what it would cost to rent “an equivalent space”, since homeowners don’t really know that information without significant due diligence - which I don’t expect from a telephone survey.

So back to the beginning: it seems “made up”.


This is another example of the puzzling persistence of inefficiency and inaccuracy in a digital, interconnected world.

There shouldn’t be any need to “sample” or “impute” this data. Rents are the primary form of income for landlords and should be linked to tax payments. Mortgage payments are a primary form of income for banks or mortgage processors that should be monitored continuously as part of their internal financial controls.

This information should be obtainable with near 100% accuracy down to the ZIP code if we modernized tax payment systems in the IRS and required better financial health monitoring of financial institutions. With it, the government and economists would know each week

  • how many mortgage payments are being made / missed
  • how many rent payments are being made / missed
  • average mortgage payment per ZIP code
  • average rent payment per ZIP code
  • if kept linked to the payer by an anonymized token, changes in payment amounts for the same property could be trended over time

Including an imputed cost of housing for home OWNERS who only face current housing prices indirectly via inflated real estate taxes seems obviously flawed. I own my home outright so my yearly housing cost is only about $5500 (my real estate tax bill). Claiming that my statistically imputed monthly cost of goods / services / housing is still affected by housing inflation like those who still owe or rent distorts that figure by at least $2000 per month.

It’s analysis like this that makes one wonder if many of these long-standing traditions of economic forecasting should be scrapped entirely and started over from scratch. Very few remember or understand all of the manipulations that have built up over time. They might have been added with the best of intentions or to skew the results towards favored parties or results but they have clearly jumped the shark of reality / relevance.