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Back Out Housing Adjustments, and Core CPI = 5.3%
Posted By Barry Ritholtz On October 17, 2005 @ 9:52 am In Economy,Inflation,Real Estate | Comments Disabled
We visited the issue of BLS "Owners Equivalent Rent" in CPI back in May  (and several times since ). But we never did the heavy lifting as to exactly what the magical core rate would be if we back out the misleading BLS adjustment
Kudos to Tim (themessthatgreenspanmade ) for rolling up his sleeves and doing the hard work of actually calculating what the core rate would be  without the absurdity of the BLS hedonic adjustments: We end up with a Core Rate of 5.3%
Put that in your
Hedonic BLS Modelling pipe and smoke it . . .
UPDATE: OCTOBER 17, 2005 10:26 AM
I abuse the term Hedonics  to refer to ANY adjustment to price based on a rationale of logic (or illogic), rather than the focus on actually price.
It is technically more precise to say that the Owner’s equivalent rent is a decision made in the process of designing the BLS CPI model — and less a true Hedonic adjustment.
Home Ownership Costs and Core Inflation 
Article printed from The Big Picture: http://www.ritholtz.com/blog
URL to article: http://www.ritholtz.com/blog/2005/10/back-out-housing-adjustments-and-core-cpi-53/
URLs in this post:
 May: http://bigpicture.typepad.com/comments/2005/05/how_housing_low.html
 since: http://bigpicture.typepad.com/comments/2005/06/rent_vs_cpi.html
 themessthatgreenspanmade: http://themessthatgreenspanmade.blogspot.com
 actually calculating what the core rate would be: http://themessthatgreenspanmade.blogspot.com/2005/10/home-ownership-costs-and-core.html
 Image: http://bigpicture.typepad.com/.shared/image.html?/photos/uncategorized/cpiandhomeprices.jpg
 Hedonics: http://www.bartleby.com/61/24/H0122400.html
 Ludwig von Mises Institute: http://www.mises.org/
 how BLS abuses Hedonics here: http://www.mises.org/story/1873
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