How long before the typical American house price will be the cost of Diet Coke?

by philg

The median sales price of a house is about $400,000 (WSJ) currently. We can check inflation in the New York Times:

As with any NYT article, the above contains plenty of lies. The biggest lie is graphing the official government inflation data going back to 1965 without noting that the method of calculating the inflation rate has dramatically changed over time (to make it appear lower, e.g., by excluding the purchase price of houses and actual mortgage and property tax costs incurred). The next lie is that the current inflation rate is 9.1 percent. The actual current rate, according to the same government data release purportedly covered by the NYT, is 1.3 percent per month (CNBC), which works out to 16.7 percent per year (1.013 raised to the 12th power).

At the actual current rate of inflation, how long before $400,000 is the price of a Diet Coke? Let’s assume that we’re getting our refreshing sugar-free soda in a restaurant for $5 (including obligatory tip). Within one human’s COVID-19-shortened lifespan of 73 years, therefore, the $400,000 price of a house will become the price of a Diet Coke. From Wolfram Alpha:

27 thoughts on “How long before the typical American house price will be the cost of Diet Coke?”

  2. Surprised how well personal experience predicted the latest report. Lions manely just buy food & that went up dramatically in June. Suspect it was due to gas prices peaking. Funny how the things we buy every day don’t count as the core CPI.

  4. Only madmen, economists, and politicians believe in infinite exponential growth, in our finite world with finite resources.

  5. “Dr” Phil: you better cancel that NYT subscription and go sole-source with Fox News, like the rest of your fellow right-wing insurrectionists.

    https://today.yougov.com/topics/politics/articles-reports/2022/04/05/trust-media-2022-where-americans-get-news-poll
    (graph half way down the page)

    Right wingers only believe Fox News, OANN, Newsmax, and Brietbart. All real pillars of truth.

    Gas prices currently are at -10% inflation month-to-month, so at this rate gas will be less than 50 cents/gallon in 4.50*.9^x = .5 x = 20 months, well before the 2024 election

    • https://www.foxbusiness.com/economy/inflation-surges-june-hitting-new-40-year-high is the corresponding Fox story. The headline is just as misleading as the NYT, but the body text is more complete:

      The Labor Department said Wednesday that the consumer price index, a broad measure of the price for everyday goods, including gasoline, groceries and rents, rose 9.1% in June from a year ago. Prices jumped 1.3% in the one-month period from May. Those figures were both far higher than the 8.8% headline figure and 1% monthly gain forecast by Refinitiv economists.

      Fox doesn’t got back as far so they don’t necessarily have to put in a description of how the CPI has been redefined over time (see https://www.bls.gov/opub/btn/volume-2/owners-equivalent-rent-and-the-consumer-price-index-30-years-and-counting.htm for example)

    • It is interesting that Mike still believes the NYT after the great COVID-19 policy reversal. We have been seeing manufactured consent (a concept promoted by left wing Chomsky!) first hand.

      Mike, I suggest that you follow Glenn Greenwald on Twitter. NYT hypocrisy and policy reversals are a recurring topic and documented with links and quotes.

      Fox News is ragingly popular among Democrats:

      https://www.politico.com/news/magazine/2022/02/02/democrats-fox-news-entertainment-conservative-liberal-00004843

      “In October, The Wrap reports, Tucker Carlson’s primetime show was the top-rated news show among Democrats between 25-54.”

    • Australian Anonymous: That’s one of Toucan Sam’s trademark lines (along with his continued refusal to care about BLM)

      Anon #1: Almost all of the people that I know who watch Fox News are passionate Democrats. Then they post outrage about what they saw on Facebook. Then they go back to watching. I can think of exactly one conservative friend who watches Fox News regularly. (I myself see it only when I’m at FBOs; it is the Official News Channel of Aviation.)

    • @Mike, I love, LOVE this. Your thinking and strategy will give American lower gas prices AND get President Biden reelected for a second term. My only disappointment is that this will take 20 months before American’s see any relive. Can Americans wait that long? How about if President Biden takes action today so that we can fix this in 1 or 2 months?

      President Biden, with a stroke of his pen can re-open Keystone pipeline and re-established drilling licenses. This will flood the market with oil and thus bring prices down. Not just in the USA but across the globe too! This has additional benefits:

      1) Inflation will come down and economic activities will improve, across the globe and
      2) Putin’s revenue will be impacted greatly and thus lose the war with Ukraine and
      3) President Biden’s approval will skyrocket and will have an easy path for 2024 election.

      What’s more, in 2024, President Biden could win the Nobel Prize for Economies and Peace.

      What’s left is taming COVID which is resurging again [1]. For that, our hope is in Dr. Jill (I gave up on Dr. Fauci). She can win the Nobel Prize for Medicine once we tame COVIDFear.

      [1] https://www.cnn.com/2022/07/14/health/omicron-vaccine-event-safety-covid-wellness/index.html

    • Australian Anonymous: That’s one of Toucan Sam’s trademark lines (along with his continued refusal to care about BLM) Obama always said if you like your trademarked lines you can keep your trademarked lines!

    • @Anonymous, I know, but Mike thinks in 20 months this will all be behind us — on it’s own without anyone doing anything. That’s why I proposed actionable plan which could save us all and give President Biden a real good chance to be reelected in 2024. However, I don’t expect my plan to be welcomed by tree-huggers!

    • Republican Congress and re-elected Biden could be a way for US out of current disastrous trends. The way it happenned in late 90th with activist Reublican Congress and re-elected Clinton. When NYT targets Biden it gives me a pause to think. NYT is up for no good. Now Biden is fulfilling his electoral promises to Sanders and Democratic Socialists, an avangard of Democratic party. He could return to sanity if freed from their embrace.

  6. Jesus. I can’t even think about that stuff. I’m sure Wolfram Alpha + you are right, but man, that’s too much! I don’t drink any diet or regular Coke. I’ve been spending all my money keeping the bills to my fake 5G cellphone provider paid and worrying about what happens when New York City gets hit with a nuclear blast.

    Of course we all know what that means: nobody build any nuclear power plants! Right about the time Americans might consider doing that again, it’s important for Comrade Adams to remind New Yorkers of how dangerous anything with the word “nuclear” in it is.

    Get inside.
    Stay inside.
    Stay tuned.
    Kiss your ass goodbye.

    • People should instead go to Alex Wellerstein’s NUKEMAP simulation:

      https://nuclearsecrecy.com/nukemap/

      Basically, this PSA warns people about the *word* nuclear but it doesn’t do anything really to help them if, say, a 500kT airburst goes off. There won’t be anyone left.

      IMHO the announcement was timed to head off any talk about building “nuclear” power plants, because most people in New York City don’t know the difference, and they vote!

  7. Looks like CNN is finally seeing the light. Or should I say speaking the truth? Or maybe giving up on President Biden and Democrats?

    Read the section on “Housing costs are making inflation much worse” [1].

    The part that CNN still lies about is this: “That’s concerning to economists because rising housing costs are sticky. Food and gas prices can change quickly.”

    No, food and gas prices do NOT change quickly or change downward by much especially food. Gas going up this time around is so different from previouse increases. Why? It was going up even before Putin invaded Ukraine and producers outside Russia, such as Saudi Arabia to name one, can step in and increase production to ease things off. They haven’t and even if they do, they won’t be able to meet make an impact. Furthermore, this gas and inflation crises, this time around, are truly global and are man made. Thanks to COVIDFear to get it started!

    [1] https://www.cnn.com/2022/07/14/investing/premarket-stocks-trading/index.html

  8. There is no mistake in the CPI monthly/yearly results – you are calculating them incorrectly. The inflation numbers are calculated as year-over-year values. A one-month CPI value isn’t multiplied out to determine a yearly CPI value.

    • Yes: I don’t think it is a “mistake” to say that inflation compared to a year ago is 9.1 percent. But it is a mistake to believe that is the “current” rate, which is what matters to most people (who are setting prices or paying prices). Kind of like the GDP growth numbers that we often see. They’re never adjusted for population growth so they’re irrelevant to the average person’s lived experience.

  9. One more thing: Due to the year-over-year official CPI methodology, I personally believe that Fed and Treasury officials were seeing inflation as ‘transitory’ in 2021 because the uptick in inflation in 2021 vs 2020 was to be expected. After all, the economy was merely making up for the suppression of demand/prices from 2020. For instance, September 2021 prices vs September 2020 prices would be expected to be higher than normal due to pent up demand in the system.
    Of course they neglected to take into account trillions of dollars in stimulus spending (still going on), on top of the Fed buying trillions in assets. Oops!

    • philg: As usual, you are correct! The most ‘current’ rate is the monthly rate we all experience. The difficulty is converting that to a rate that is understandable and practical, and extrapolating a monthly result to a yearly figure is, in my view, even more misleading than the serious changes in the composition of the CPI calculation over time or the seasonal adjustments that are part black magic.
      Perhaps economic headline writers should report the monthly CPI and include a comparison such as, ‘this is the highest June CPI monthly reading since 1981’.

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