General Investing and Economics Discussion - No Politics

[Deleted member 2897]

The median house price in Georgia is now $232,144. In 2000 it was $111,2000. That is slightly over double in 21 years. That would mean inflation rate on housing is around 3.5% per year in Georgia. I don't know all of the food items, but bread is about double and milk is only up about 21%. Meat is up greatly, but most of that happened in the COVID shutdowns, not during normal inflation. I would guess overall food costs are close to double what it was in 2000. Once again that is around 3.4% per year inflation.

Healthcare costs have risen much faster than other parts of the consumer price index. There are a myriad of reasons: Technology(Including advanced medicines), pharmacy brokers, regulation compliance, overbuilding, use of medical care for issues that weren't taken to doctors years ago, etc. Total healthcare costs in the US have gone from $1.3 trillion to $3.8 trillion since 2000. That is an increase of about 3 times. That would be an average inflation rate of about 5.4% for healthcare since 2000. Higher than other items, but still not 8% and still not anywhere close to 10%, and that is the one item of the CPI that has increased more than others.

The chart that you posted does not hold up to scrutiny.

According to the AJC, the median home price in Georgia was almost $300,000 two and a half years ago.

This is what an "average" house looks like in Georgia

According to a recent Trulia assessment, the size, prices and amenities of the "average" house varies a great deal across the country.

www.ajc.com

Whenever this was published, it says the median home price is $360,000:

Georgia Homes for Sale: GA Real Estate | Redfin

There are currently 50,479 homes for sale in Georgia. The median list price in Georgia is $399,700 and the average price per square foot is $181.

www.redfin.com

A quadruple over 20 years is -8%.

 

[RonJohn]

LOL. The current advertised CPI is even worse. If you estimate slightly less at 8%, it holds up well in my opinion. Homes where I live are up about 5-6x. Inflation isn’t 2%. It’s a completely hilarious notion. If you have a new iPhone come out at the same price with 2x the computing power, the CPI formula calculates an enormous reduction in cost. It’s a joke.

BTW, you can’t look at healthcare SPENDING. People spend less and hold back when things get expensive. You have to look at per unit costs.

In 2000, the average price for a new car was $21,850. In 2021, it is $40,179. That is close to double, which would be an inflation rate of 3.4%. at 8%, it would currently be an average of $109,989 for a new car. There are probably some neighborhoods where the average price of new cars is greater than $100,000. That is not the average price of new cars nationwide.

 

[RonJohn]

According to the AJC, the median home price in Georgia was almost $300,000 two and a half years ago.

This is what an "average" house looks like in Georgia

According to a recent Trulia assessment, the size, prices and amenities of the "average" house varies a great deal across the country.

www.ajc.com

Whenever this was published, it says the median home price is $360,000:

Georgia Homes for Sale: GA Real Estate | Redfin

There are currently 50,479 homes for sale in Georgia. The median list price in Georgia is $399,700 and the average price per square foot is $181.

www.redfin.com

A quadruple over 20 years is -8%.

$265,000 is "almost" $300,000? That is a good job of extreme rounding. Even at $265,000 that would be 4.2% inflation. At 8% inflation, the price would increase by 5x in 21 years.

I know you have paid attention to what COVID shutdowns have done to house prices in the last year. The current prices are not related to average inflation. I believe we are going to enter a period of extreme inflation. However, that does not change that the average inflation for the last 21 years has been nowhere close to 10%, and not even close to 8%. I am not suggesting that the CPI numbers are perfect, but reality is a lot closer to their numbers that what you have been posting.

 

[Deleted member 2897]

In 2000, the average price for a new car was $21,850. In 2021, it is $40,179. That is close to double, which would be an inflation rate of 3.4%. at 8%, it would currently be an average of $109,989 for a new car. There are probably some neighborhoods where the average price of new cars is greater than $100,000. That is not the average price of new cars nationwide.

Nobody ever said that. And in fact, I specifically stated the prices of cars hasn't gone up that much over the last 20 years.

 

[Deleted member 2897]

$265,000 is "almost" $300,000? That is a good job of extreme rounding. Even at $265,000 that would be 4.2% inflation. At 8% inflation, the price would increase by 5x in 21 years.

I know you have paid attention to what COVID shutdowns have done to house prices in the last year. The current prices are not related to average inflation. I believe we are going to enter a period of extreme inflation. However, that does not change that the average inflation for the last 21 years has been nowhere close to 10%, and not even close to 8%. I am not suggesting that the CPI numbers are perfect, but reality is a lot closer to their numbers that what you have been posting.

The redfin article says $360,000. The AJC article opened with $289,000 which is what I was referring to - I picked the wrong number...and that was 2.5 years ago. $360,000 today is almost 4x...correct, 8% inflation over 20 years is about 4x.

"The current prices are not related to average inflation." LOL. Well if we're going to say what things cost today isn't sustainable and skews the data...well I guess we'll see and you're probably right. But also, it is what it is. The costs are what they are.

 

[RonJohn]

The redfin article says $360,000. The AJC article opened with $289,000 which is what I was referring to - I picked the wrong number...and that was 2.5 years ago. $360,000 today is almost 4x.

"The current prices are not related to average inflation." LOL. Well if we're going to say what things cost today isn't sustainable and skews the data...well I guess we'll see and you're probably right. But also, it is what it is. The costs are what they are.

The Redfin quote isn't an article, it is a summary of current listings. The AJC article opened with $289,000 as the national average. They say the Georgia average is $265,000.

You posted a graph showing that inflation was around an AVERAGE of 10%. Prices taking an immediate 50% bump because of COVID does not indicate that the last 20 years have been higher than what they were. I believe we are about to see actual double digit inflation. You will then be able to see that we have not been in double digit inflation for the past 20 years. The chart you posted is junk and does not hold up to any scrutiny.

 

[orientalnc]

This is an interesting discussion, but it's not about investing.

 

[Deleted member 2897]

The Redfin quote isn't an article, it is a summary of current listings. The AJC article opened with $289,000 as the national average. They say the Georgia average is $265,000.

Two and a half years ago. And its $360,000 currently today. That's almost 4x over the last 20 years.

You posted a graph showing that inflation was around an AVERAGE of 10%. Prices taking an immediate 50% bump because of COVID does not indicate that the last 20 years have been higher than what they were. I believe we are about to see actual double digit inflation. You will then be able to see that we have not been in double digit inflation for the past 20 years. The chart you posted is junk and does not hold up to any scrutiny.

Look, inflation is exactly what that chart shows.........going off of what the CPI calculations were in the formula from 1980. There are valid reasons why the CPI formula was changed. But inflation certainly hasn't been 2% for the last decade. As we've both discussed here with home prices, healthcare pricing, groceries, and so on, large swaths of the economy have quadrupled in cost over the last 20 years. That's about 8% inflation. Yes there are pockets of items that have not increased much (cars and other appliances come to mind) and there are pockets that have gotten cheaper (I think computers and TVs and things).

Remember the chart I showed for money supply? Its utterly ridiculous and mirrors what your gut is telling you - inflation hasn't been that terrible for awhile, but is certainly higher than 2% (I'm putting words in your mouth but trying to do it correctly), but it feels like its gotten really bad here lately. Well here you go:

M1

View a measure of the most-liquid assets in the U.S. money supply: cash, checking accounts, traveler's checks, demand deposits, and other checkable deposits.

fred.stlouisfed.org

 

[LibertyTurns]

Healthcare costs are the worst item to decipher. You have the following to consider:

a. increased employer costs that they absorbed in lieu of you receiving increased wages

b. Co-pays vs premiums. You don’t have co-pays if you’re not sick

c. Medicare/Medicaid where government has increased their share of the costs

The numbers in the chart seemed high, but we know inflation is not and has not been 1-2%. Maybe it’s 5%, perhaps it’s 6%, could be 7%, who knows? It’s damn sure not what our government has been telling us. That much is certain.

 

[forensicbuzz]

[replying to both you and forensic]

Based on what I hear people telling me on TV with how miserable the economy is, it must be true.

I lived in Charleston 25 years ago and paid $500/month in rent. So 8% inflation = $2,000. You won’t find a $500/month apartment here. You won’t find a $1000/month apartment here. My second apartment in 1998 backed up to a pond by a golf course and was an upgrade and was $600/month.

I was referring to health insurance premiums. On top of that, we probably pay another $5k in healthcare costs. If between you and your employer your total health insurance and healthcare costs $10k/year I’d surmise to might be on Medicaid.

That's what I pay. We're not talking about the true cost of healthcare, we're talking about cost of living. NO ONE pays 100% of their own healthcare unless they're independently wealthy. That's just silly.

 

[forensicbuzz]

Healthcare costs are the worst item to decipher. You have the following to consider:

a. increased employer costs that they absorbed in lieu of you receiving increased wages

b. Co-pays vs premiums. You don’t have co-pays if you’re not sick

c. Medicare/Medicaid where government has increased their share of the costs

The numbers in the chart seemed high, but we know inflation is not and has not been 1-2%. Maybe it’s 5%, perhaps it’s 6%, could be 7%, who knows? It’s damn sure not what our government has been telling us. That much is certain.

Inflation has been item-specific, and therefore individual-specific. Everyone has their own experiences with inflation as it affects their standard of living.

 

[Deleted member 2897]

That's what I pay. We're not talking about the true cost of healthcare, we're talking about cost of living. NO ONE pays 100% of their own healthcare unless they're independently wealthy. That's just silly.

Its silly NOT to include it. My company pays 100% of my health insurance premiums. That is real money they are paying for me and would pay me as salary if they didn't have to cover health insurance. Most companies actually offer that as an option (to pay you money if you can get insurance somewhere else, like your spouse's job). In fact, my wife and I at different times have each done that back and forth - where one of us gets a huge bump in pay for declining health insurance coverage. That is real money that should be accounted for.

 

[forensicbuzz]

Its silly NOT to include it. My company pays 100% of my health insurance premiums. That is real money they are paying for me and would pay me as salary if they didn't have to cover health insurance. Most companies actually offer that as an option (to pay you money if you can get insurance somewhere else, like your spouse's job). In fact, my wife and I at different times have each done that back and forth - where one of us gets a huge bump in pay for declining health insurance coverage. That is real money that should be accounted for.

I've never heard of such in 35 years of working. The cost of healthcare benefits is a perk, not part of my compensation. Sure, it figures into fringe benefits, and companies use that as an incentive, but it's always been a differentiator to have better healthcare, not the primary driving force. The thing is, it's voluntary and can be changed from year to year, so it's like a bonus. I've never worked on a bonus structure; I think bonuses incentivize a few and disincentivize the majority.

Besides, you're comparing your situation, not that of the average minimum wage earner. I don't think your situation fits the average wage worker.

 

[Deleted member 2897]

I've never heard of such in 35 years of working. The cost of healthcare benefits is a perk, not part of my compensation. Sure, it figures into fringe benefits, and companies use that as an incentive, but it's always been a differentiator to have better healthcare, not the primary driving force. The thing is, it's voluntary and can be changed from year to year, so it's like a bonus. I've never worked on a bonus structure; I think bonuses incentivize a few and disincentivize the majority.

Besides, you're comparing your situation, not that of the average minimum wage earner. I don't think your situation fits the average wage worker.

The average minimum wage worker does not get health insurance at all, because they can't afford it. That's the whole point of the inflation conversation in this thread - that's how you control your costs when everything is spiraling out of control - you curtail your spending. Healthcare benefits are a part of compensation. I can assure you that the $20,000 or $10,000 or whatever it is a given company pays for health insurance premium is real money and they have to write checks for it.

"It makes no sense that the average cost of living is $75,000 when the median wage is $55,000." Well that's because working class people don't pay for health insurance and live with 3 roomates in a single apartment and everything else.

 

[LibertyTurns]

I've never heard of such in 35 years of working. The cost of healthcare benefits is a perk, not part of my compensation. Sure, it figures into fringe benefits, and companies use that as an incentive, but it's always been a differentiator to have better healthcare, not the primary driving force. The thing is, it's voluntary and can be changed from year to year, so it's like a bonus. I've never worked on a bonus structure; I think bonuses incentivize a few and disincentivize the majority.

Besides, you're comparing your situation, not that of the average minimum wage earner. I don't think your situation fits the average wage worker.

Every company I’ve worked for since I retired from the military has included every benefit including life, health insurance, etc as part of my total compensation package. Paid days off, a free car to drive, etc are just like money. My complaint has been I have Tricare and that benefit is of zero value to me. I always ask for the money instead & a couple of times got offered extra for agreeing to select the “self insured” option. My current company does it for employees whose spouse covers them, those that elect to go without insurance, etc.

 

[forensicbuzz]

Every company I’ve worked for since I retired from the military has included every benefit including life, health insurance, etc as part of my total compensation package. Paid days off, a free car to drive, etc are just like money. My complaint has been I have Tricare and that benefit is of zero value to me. I always ask for the money instead & a couple of times got offered extra for agreeing to select the “self insured” option. My current company does it for employees whose spouse covers them, those that elect to go without insurance, etc.

Never heard of such.

 

[Deleted member 2897]

Every company I’ve worked for since I retired from the military has included every benefit including life, health insurance, etc as part of my total compensation package. Paid days off, a free car to drive, etc are just like money. My complaint has been I have Tricare and that benefit is of zero value to me. I always ask for the money instead & a couple of times got offered extra for agreeing to select the “self insured” option. My current company does it for employees whose spouse covers them, those that elect to go without insurance, etc.

Every company I’ve worked at going back 20 years includes all tha on a “total compensation” summary report, and offers money if you get health insurance somewhere else. But regardless of whether someone sees/gets that or not, it’s a part of their pay. It’s real money the company spends and it is real.

 

[RonJohn]

Dogecoin passed 50 cents today.

 

[ramblinwreckguru]

Going back to home prices, I have been in the market to invest in a home for about a year now and have been getting my arse kicked in the offer phase, especially this year in particular. Can anyone explain why home prices are suddenly getting jacked up in GA through this Covid pandemic? It's almost like Covid has spurred the economy instead of setting it back like I would have thought. Heck, people are now offering about 10% more than asking and willing to pay cash for the difference between offer and appraisal while guaranteeing the purchase "site unseen". My realtor wouldn't recommend I do any of this and is as perplexed as I am on the situation.

 

[RonJohn]

Going back to home prices, I have been in the market to invest in a home for about a year now and have been getting my arse kicked in the offer phase, especially this year in particular. Can anyone explain why home prices are suddenly getting jacked up in GA through this Covid pandemic? It's almost like Covid has spurred the economy instead of setting it back like I would have thought. Heck, people are now offering about 10% more than asking and willing to pay cash for the difference between offer and appraisal while guaranteeing the purchase "site unseen". My realtor wouldn't recommend I do any of this and is as perplexed as I am on the situation.

• There is a lot more money available. The government has been printing it and giving it to: people in the form of stimulus payments, businesses in the form of forgivable PPP loans, unemployed people in the form of unemployment payments larger than their normal wages.
• Some of the building suppliers were shut down for COVID, either from regulation or from outbreaks so supplies are very scarce at the moment. Wood, steel, etc. prices are skyrocketing which is causing new house building to be extremely expensive.
• New house prices are skyrocketing, if they are available, so used house prices are following.

Combine people with an extra $8-10k for a down payment with building prices going up and it is making the housing market boom.