I previously posted on the fact that the housing component of the CPI is based on a rent calculation, and not home values.
I just came across an interesting graphic which demonstrates housing is by far the largest component of the CPI. Unfortunately, the description in the graphic of how the housing component is calculated is vague. Here is the official BLS explanation.
This approach has come in for a lot of criticism. Here is a sample:
Financial Sense University: "The Complete and Utter Failure of Owners' Equivalent Rent"
The Mess That Greenspan Made: "How Owners' Equivalent Rent Duped the Fed"
My Budget 360: "Owners’ Equivalent of Rent: The Fed and BLS Gaming the System"
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