Housing is distorting Inflation

RS, are you changing your inflation views again? So no longer is inflation an exclusively monetary phenomenon, but now it's actually related to the PRICE of things?

HAHAHAHAHA!

Now then, we've been discussing this precise topics for years. As you should know, housing costs have NOTHING to do with inflation. Inflation in owner-occupied real estate is measured by owners' equivalent rent, similar in concept to imputed rent, which is what an owner would pay to rent himself the same place as he lives in, in an arm's-reach transaction.

Thus, when asset prices rise or fall, they do not affect inflation as currently measured because market rents are not affected. When leverage costs - and availability - rise and fall, they do not affect inflation as currently measured because market rents are not affected. When property taxes rise or fall, they do not affect inflation as currently measured because market rents are not affected.

Perverse? Yes. True? Yes. Its effect is that you have 0 inflation when prices are skyrocketing, and high inflation when prices are falling. All because the asset price isn't taken into account.

Stupid, stupid, stupid. But that's how it works.

I'm glad to see that you're no longer a neoclassicist Vienna school debunked economic theorist anymore, however. Guess Atlas didn't shrug enough.

just highlights how incredibly misleading (and to my mind therefore fundamentally useless) these statistics are. there is also no way to account for substitution behavior (i.e. buy $10 bottle of wine instead of $15 or vice versa) and long term value of capital assets (purchase price for fridge is 15% higher but lasts 25% longer and repair bills are 30% lower).

CPI has a huge inflation cpt(1/3?). It's a mistake of policy makers not to acknowledge the unique dynamics plaguing housing. They should discount that cpt of the CPI when making policy decisions.

RS - what?

Housing.............................. 43.421
Shelter.....................................33.200
Rent of primary residence....................... 5.957
Lodging away from home.......................... 2.478
Owners' equivalent rent of primary residence.... 24.433
Tenants' and household insurance................ 0.333
Fuels and utilities......................... 5.431
Household energy................................. 4.460
Fuel oil and other fuels.............................. 0.301
Gas and electricity................................... 4.159
Water and sewer and trash collection serv....... 0.913
Household Furnishings and operations........ 4.790
Household operations............................. 0.781

RS, yes, overall housing constitutes about 40% of inflation as measured by Keynesians. Not by the Vienna School of Atlas Shrugged Novels, who measure inflation by the growth in the money supply, velocity notwithstanding.

So there's where you fall down first.

Where you fall down SECOND - and more importantly - under the current methodology, only housing EXPENSES are counted, not the cost of the underlying asset. If your house rose from $100,000 to $1,000,000 in price in 1 week, it would HAVE NO EFFECT ON INFLATION WHATSOEVER as currently measured.

Then, if your house did rise in value from $100,000 to $1,000,000 in price in 1 week, but the market rent you could get for that selfsame house FELL from $1,000 a month to $900, there would be DEFLATION of 10%.

That is part of what happened in the past 10 years: housing quadrupled in price but rents stagnated, therefore zero inflation.

Distorted? Its not distorted, its REALITY.

Housing prices are a huge chunk of costs. OF COURSE if it goes down then the measure of inflation should as well.

http://blogs.wsj.com/economics/2010/03/26/qa-philly-feds-plosser-open-to-sales-of-feds-mbs/
(SAME GUY DIFFERENT SPEECH)

What’s your view of inflation in the U.S. given the moderation in core CPI?

Plosser: Core is pretty low, which is fine. One of the things we have to be a little bit careful of, particularly with the core, I think they’re probably a little bit distorted. We’ve had a huge housing shock. Shelter prices in the CPI have fallen substantially. I don’t like taking out elements, but shelter and owners’ equivalent rent are a huge percentage of the core. We have a tendency to use core as a measure of the underlying trend. It’s not that we target core, but is core a useful signal of what the underlying trend in inflation is? I don’t know the answer to that. We have to be very careful.
I’m not terribly concerned, although a lot of people claim that I am, about inflation in the near term. I don’t think that’s where the risks are. I think it’s important for central banks to look at the intermediate and longer term, and I think that’s where the risks are for inflation given the size of our balance sheet. I am cognizant of the fact that that the Fed’s going to have to try to manage its way out of this extraordinarily accommodative liquidity we’ve provided to the economy. We’re going to have to get out from that before we see inflation occurring.”

"Housing prices are a huge chunk of costs."

Nope. One more ignorant comment by somewhereelse. Inflation counts only "owners' equivalent rent," a form of imputed rent, which measures the MARKET RENTAL VALUE of a property, not the cash price or the carrying cost of the property.

Look it up:

http://www.safehaven.com/article-6243.htm

It's an easy-to-understand guide to what happened when the Nixon Administration - saddled with inflation - changed the definition.

http://www.economist.com/world/united-states/displaystory.cfm?story_id=15732618

A look beneath the surface, however, complicates the story. Dave Greenlaw of Morgan Stanley notes that one component explains all the decline in core inflation: housing. America’s Bureau of Labour Statistics measures the cost of home ownership by what someone would have to pay in order to rent the house he owns. Falling home prices and high vacancy rates are pushing rents down. Since rent and the estimated equivalent of rent for owners comprise more than 40% of the core index, this has a huge impact on the direction of core inflation. When housing costs are excluded, core inflation has actually risen, to 2.6% in February (see chart). Mr Greenlaw predicts that housing inflation will stop falling, spurring the Fed to raise rates later this year.

And if housing prices stabalize or go up slightly, we've screwed up and have inflation much higher than the rate of the past year which benefited from lower rents..

http://blogs.wsj.com/economics/2010/03/18/economists-react-tight-lid-on-price-pressures/
Conventional wisdom is that the recession has created a good deal of slack in the economy leading to a deceleration in core inflation. However, since the housing market appears to be showing signs of some tentative stabilization, shelter costs could soon begin to level off. Thus, while base effects point to some further modest slippage in the yr/yr readings for core CPI over the next few months, the likelihood of any meaningful deceleration in underlying price pressures going forward from here seems quite limited despite a still wide output gap. –David Greenlaw, Morgan Stanley

"Falling home prices and high vacancy rates are pushing rents down."

Not true. Falling home prices have nothing to do with rents. High vacancy rates do, however.

What causes high vacancy rates is high unemployment.

Plus the two stories you purport to concatenate to prove your point, RS, are self-contradictory:

"while base effects point to some further modest slippage in the yr/yr readings for core CPI over the next few months, the likelihood of any meaningful deceleration in underlying price pressures going forward from here seems quite limited"

How does that jibe with falling property prices?

And I REPEAT, Riversider - though it's not in any Ayn Rand book you're likely to read - HOUSING PRICES DO NOT AFFECT INFLATION.

At all. Zero. Zilch. Nada. Nothing. Niente. Whatever.

How much you pay for a property is completely uncorrelated to how much you can rent it out for. If it were correlated, the past 10 years would have never occurred.

Sheesh.

you've been so busy ranting , you failed to understand the argument. i'm done.

Government figures on inflation have been such BS for so many years, WTF knows what anything really is anymore?

Right. Lets just IGNORE the biggest single expenditure consumers have and then compute inflation. Retarded. No, since housing prices are declining as measured by the CPI, then in fact the typical consumer's basket of goods and services have risen in aggregate by whatever amount the CPI says...since actual people live in actual houses and either pay rent, or imputed rent.

And these arguments about "distorting" inflation numbers don't say one should not include housing costs AT ALL, they question whether the asset appreciation of depreciation should be included. Under most countries' definition of inflation, the asset value of a house is separated from the imputed rent. Using your twisted logic, inflation should REALLY have been 10 percentage points higher in places like San Diego a few years ago, and should be negative now....OR worse you are saying that the increase or decrease in housing prices should never count no matter what.

However, you ARE contradicting yourself, based on the varying articles you have posted above.

"you failed to understand the argument"

What argument? You've yet to do anything but cut and paste what you read, without understanding it.

The only argument I see you try to make is that you are both a supply-sider AND believe in wage/cost-push inflation. Which of course is entirely self-contradictory (again) because supply-siders are monetarists, neo-Classicists, and Vienna-Schoolers, who believe that inflation is nothing but a monetary phenomenon, the debasement of a fiat currency, which somehow would magically go away if we got rid of the central bank and returned to the gold standard.

Which the 1800's and the 1970's proved doesn't work.

And then - THE PRICE OF HOUSING DOES NOT AFFECT INFLATION. It can't. By definition. It's not in the composition of inflation.

Housing EXPENSES are, not the price of buying a house, not the price of carrying a house, nothing.

So - what's your "argument"?

Inflation should be measured on a) the price of rents; and b) the price of housing, or alternatively, at least owners' carrying costs. But it's not.

Which led to a huge asset bubble and zero inflation. Now we will have actual deflation, yet higher inflation as rental costs go up with incomes.

Maybe we could get Plosser from the Philly Fed and the SF and NY Fed authors of the study below (just posted by aboutready here: http://streeteasy.com/nyc/talk/discussion/19804-latest-pending-home-sales-data) in a cage and make them fight it out. I would totally buy tickets. Or we could get it on pay-per-view for the next SE meet-up.

http://www.frbsf.org/publications/economics/letter/2010/el2010-11.html

"Conclusion

Weakness in the housing market has reduced the inflation rate of the housing components of core inflation. Yet, this very substantial decline in the rate of housing inflation has not been isolated. Rather, it is indicative of a much wider decrease in inflationary pressures observed since the peak of the financial crisis. Even if we take housing out of core PCEPI, inflation has come down substantially over the past 1½ years. As a consequence, there is little reason to reduce the emphasis on core inflation as the main gauge of underlying price pressures in the economy. Recent core inflation trends reflect substantial and widespread disinflationary pressures, which, as Liu and Rudebusch (2010) point out, is likely due to a large amount of slack in the economy."

RIversiders new "core" CPI: Exclude Food. Exclude Energy. Exclude Housing.

Because people don't actually pay for those things with actual money. Oh wait they do.

lol

Energy is at 15 month high..over 120% off the lows during that span...sure no inflation there.
http://www.finviz.com/futures_charts.ashx?t=CL&p=w1

Let's look at food.
First meat.

http://www.finviz.com/futures_charts.ashx?t=MEATS&p=w1

all at 52 week highs.

Next Grains.
http://www.finviz.com/futures_charts.ashx?t=GRAINS&p=w1
Not much action there. I can explain this. Atkins Diet???

Which is why, e75, none of what is going on in the stock market right now makes sense: why are we at 2008 levels for oil, emerging markets (same thing) when demand is still depressed by 9.7% unemployment, and the entire economy is still being supported by the government?

Also makes hay of RS's (and LICC's) that government spending crowds out private spending - EVEN WHEN THERE IS NO PRIVATE SPENDING!

wait, ericho's evidence is that we're above the numbers when NOTHING was in demand!?!?!? I love it!

We're 45% below commodity prices from 2 years ago!

Up 45% since last year.

And 45% higher since 2002.

Your point?

> Up 45% since last year

When we were down 70%!

I love it!

http://online.wsj.com/article/SB10001424052702304620304575166210220338480.html?mod=WSJ_hpp_LEFTWhatsNewsCollection

Apartment rents rose during the first quarter, ending five straight quarters of declines and signaling the worst may be over for the hard-hit sector.

Nationally, the apartment vacancy rate stayed flat at 8%, the highest level since Reis Inc., a New York research firm, began its tally in 1980.

Reis tracks vacancies and rents in the top 79 U.S. markets, and rents rose in 60 of them, led by Miami, Seattle and New York—all cities that have notched big rental declines in the past year.

Rents increased 1.6% in the first quarter in Miami and 0.9% in New York. The gains came during what is usually a seasonally weak period for apartments and suggested that landlords may have some momentum heading into the peak spring and summer leasing season.

"Deterioration seems not to have just been arrested but reversed," said Victor Calanog, director of research for Reis. "Several markets have bottomed and may be on track to recovery," he said.

Nationally, effective rents, which include concessions such as one month of free rent, rose 0.3% during the quarter compared with a 0.7% decline in the fourth quarter of last year and a 1.1% drop in the first quarter of 2009. Vacancies are tied to unemployment, because many would-be renters move in with family members or double up during a downturn.

"We clearly hit an inflection point in all of our markets in January and February," said Jeffrey Friedman, chief executive of Associated Estates Realty Corp., which owns and operates 12,000 units in the eastern U.S.

FLMAO.. further down in your article Riversider:
""Rent reductions are not over yet," said Hessam Nadji, managing director at real-estate firm Marcus & Millichap. He said he didn't expect to see sustained rental growth until the second half of the year.

Barely half of the 22,000 units in buildings that opened their doors last quarter were filled, and landlords may cut deals because they face deadlines to pay back construction loans. "That's where renters are going to find deals," Mr. Calanog said."

also see chart... see those 2 blue thingys down in 01'to 02', a magnitude lower "recession" than our current one... well I count 5 thingy down. in 01', it went 2 thingy down, 2 up then 2 down thingys.... so what do you think this foreshadows, Riversider? Yes lots more blue thingy downs.....

FLMAO... go back to sleep you half article reading / look outside window to predict today's weather finance guy....

"U.S. Apartment Rents Decline as Vacancies at Record, Reis Says
April 06, 2010, 12:22 AM EDT

By Oshrat Carmiel

April 6 (Bloomberg) -- U.S. apartment rents dropped in the first quarter and the vacancy rate remained at a record as unemployment near a 26-year high limited tenant demand...."

http://www.businessweek.com/news/2010-04-06/u-s-apartment-rents-decline-as-vacancies-at-record-reis-says.html

http://beforeitsnews.com/news/30345/ISM_Reports_Indicate_Inflation_is_Driver_of_Economic_Growth.html

he CPI figures for February, the latest available, had consumer inflation as zero month over month and up only 2.1% from the previous year. The low numbers reported in the statistics are used to maintain the Federal Reserves claims that inflation isn't a problem (cynics claim that it is the other way around). But industry can't be so cavalier about its statistics because if it has to rely on them to make business decisions. Industry group ISM - Institute of Supply Management - reports have been indicating inflation for nine months now. Frequently the strongest component of the reports has been 'Prices Paid'. In the March report, 'Prices Paid' was at 75.0 and was up 8.0 from February. No other item was growing as fast as prices. In the ISM reports, 50.0 is the dividing point between expansion and contraction. A number like 75.0 indicates very strong expansion. Anecdotal comments in the report corroborated this view, with one of the respondents stating, "We are also seeing dramatic price increases."

The ISM Non-Manufacturing, more commonly known as Services, report for March also had 'Prices Paid' as the fastest growing component. The number was a strong, but not out of control, 62.9. While inflation was pumping up the overall number in the Services report, the Inventories, Supplier Deliveries and Employment components were bringing it down because they were still contracting. Service employment has now contracted for 27 months in a row according to the ISM. The government's Non-Farms Payroll report last Friday indicated that the service component of the private sector added approximately 82,000 jobs. Apparently the ISM can't find any of them.

While the mainstream media has continually been reporting that the U.S. economy is recovering, investors shouldn't consider this to be of particular significance. Reports of an improving economy always take place after severe downturns. They may or may not be accurate. If you went back and looked at U.S. news coverage during the 1930s recession, you would be able to find a number of stories about how the economy was getting better and showing evidence of recovery. These reports went on for many years. After more than a decade of misplaced optimism, the U.S. economy finally did recover thanks to World War II.

> Right. Lets just IGNORE the biggest single expenditure consumers have and then compute inflation.

Exactly.

If housing costs are down, then less pressure on wages.

Big point here is if one knows CPI is low because of the houising cpt and you have an expectation that housing costs will move to a flat or positive bias, the resulting CPI values will be much higher.

Of course, if housing continues its call, resulting CPIs will be lower...

The real point here is its a huge component and SHOULD BE...

Inflation EXPECTATIONS are entirely different from ACTUAL INFLATION. And no, I do not think people think home prices will go up by a lot, or that imputed rents will either. How? FHMA just did a well publicized survey on the very topic which came out THIS WEEK.

But in any event, CPI measures ACTUAL price increases, not expectations.

yup. I missed that RS said expectations....

He keeps changing the story.

Look, in the UK where home prices are calculated more to his liking inflation is STILL low...because of housing.

http://macroblog.typepad.com/macroblog/2010/04/disinflation-is-it-all-housing-we-think-notand-were-not-alone.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+typepad%2FRUQt+%28macroblog%29

add the atlanta fed to the NY and SF fed camp. interesting inflation difusion chart.

http://www.nytimes.com/2010/04/11/business/economy/11rates.html?ref=business

Even as prospects for the American economy brighten, consumers are about to face a new financial burden: a sustained period of rising interest rates.

That, economists say, is the inevitable outcome of the nation’s ballooning debt and the renewed prospect of inflation as the economy recovers from the depths of the recent recession.

Each increase of 1 percentage point in rates adds as much as 19 percent to the total cost of a home, according to Mr. Mayer.

And who says housing REALLY is 40% of inflation?

http://finance.yahoo.com/tech-ticker/the-fed-is-all-wrong-about-inflation-jim-bianco-says-471289.html?tickers=XHB,TIP,UDN,TBT,^DJI,^GSPC

Recent inflation data - most notably the March core CPI - suggest inflation is quite tame at the moment, bringing "great comfort to the Fed as they believe their bloated balance sheets is not posing an inflation risk," according to Jim Bianco, president of Bianco Research.

But the Fed has got it all wrong, says Bianco, who is very concerned about the potential for higher inflation and interest rates, as detailed here.

Government intervention in the housing market - most notably the first-time homebuyer tax credit - "have distorted the inflation numbers," he says.

This is hugely important because shelter is 40% of CPI, Bianco notes. "The other 60% has been in an uptrend since last summer," helping explain why most Americans feel like they're experience in the real-world is much different than the government's inflation stats.

To date, about 2 million Americans have applied for the first-time homebuyer tax credit; with that many former renters becoming homeowners, demand for rental properties has "softened," Bianco says.

It sounds wonky but is critical because of the way shelter costs are calculated in the CPI: Instead of actual house prices, the government focuses on something called "owner's equivalent rent" (OER) or the amount it would cost you to rent a house comparable to the one you own -- or have a mortgage on.

Given what Bianco calls the "big migration of renters to buyers" - especially at the low end -- that OER figure has plummeted in recent months and is currently running at "less than zero."

To summarize: government programs to support housing have depressed rental prices, which is making core inflation artificially low. And since the Fed uses core CPI as one of its primary inflation gauges, Bianco says the central bank is lulling itself into a false sense of security about inflation.

With the first-time homebuyer tax credit set to expire at month's end, he believes the Fed's delusion is going to come to an end sooner vs. later, predicting 10-year Treasury yields will be in an upswing for the rest of the year and hit 4.25% before winter.

"The Fed doesn't want to raise rates - they want to say at zero for as long as they can - the only thing that will get them to move is rising inflation," Bianco says. "If we were to see a turnaround in rents, it will put the Fed in an uncomfortable position. Do they ignore [the trend] or respond and raise rates? There's no good scenario."

> And who says housing REALLY is 40% of inflation

Noone. Its 40% of CPI.

And given its pretty much that percent of expenses for many americans, OF COURSE the cpi should do that.

If most workers have cheaper housing options, then there SHOULDN'T be pressure on wages.

And who says housing REALLY is 40% of inflation

Noone. Its 40% of CPI.

EXACTLY

only investment decisions are being made AS IF CPI & INFLATION are one and the same

And given its pretty much that percent of expenses for many americans, OF COURSE the cpi should do that.

nope!

> only investment decisions are being made AS IF CPI & INFLATION are one and the same

No, they're not. You are confused.
They are being made as if folks are looking at the ENTIRE BASKET. Which they should.

"nope!"

Wow, what a well thought out, reasoned, logical argument. Did you get that data from steveF?

Housing is 40% of CPI. -AGREED
Housing is 40% of inflation. -Not for most of us.
Is the housing cpt of CPI being distorted . - Yes "rental equivalent"
Is it a mistake to assume that rents or rental equivalent will continue to go down- YES

> Housing is 40% of CPI. -AGREED

and should be....

> Housing is 40% of inflation. -Not for most of us.

You keep repeating this to "correct" it, but I haven't seen one person make the mistake you are "correcting". If somebody did, please let me know.

> Is the housing cpt of CPI being distorted . - Yes "rental equivalent"

Well, now you're starting another argument. Have you given up on the "housing has too much of an influence" argument you spent so much time on ?

"Is it a mistake to assume that rents or rental equivalent will continue to go down- YES"

It could also be a mistake to say they'll go up.

But, its beside the point... now you're confusing inflation MEASURES with inflation PREDICTIONS.
You're arguing the wrong point, as you've been railing against measures, not predictions.

btw, your "rental equivalent" argument, which seems to be your third now (did you give up on the other two)... is off, too.

Going with asset values was a problem. That would be MORE flawed.

From the Burea of Labor Statistics:
Rental Equivalence—Background
Until the early 1980s, the CPI used what is called the asset price method to measure the change in the costs of owner-occupied housing. The asset price method treats the purchase of an asset, such as a house, as it does the purchase of any consumer good. Because the asset price method can lead to inappropriate results for goods that are purchased largely for investment reasons, the CPI implemented the rental equivalence approach to measuring price change for owner-occupied housing. It was implemented for the CPI-U in January 1983 and for the CPI for Urban Wage Earners and Clerical Workers (CPI-W) in January 1985.

Rental equivalence. This approach measures the change in the price of the shelter services provided by owner-occupied housing. Rental equivalence measures the change in the implicit rent, which is the amount a homeowner would pay to rent, or would earn from renting, his or her home in a competitive market. Clearly, the rental value of owned homes is not an easily determined dollar amount, and Housing survey analysts must spend considerable time and effort in estimating this value.

When initially introduced, the rental equivalence index’s monthly movement was calculated by reweighting the rent sample to represent owner-occupied units. Starting with the CPI for January 1987, the rental equivalence index movement was based on changes in the implicit rents of a sample of owner-occupied units. As part of the 1987 revision, BLS drew a new housing sample to replace the old rent sample. The new sample had both owner- and renter-occupied housing units. To estimate the change in the implicit rents of the owners, the CPI:

http://www.marketwatch.com/story/wholesale-prices-jump-07-on-higher-food-prices-2010-04-22?dist=beforebell
WASHINGTON (MarketWatch) -- Higher prices for vegetables helped drive U.S. wholesale prices higher by a seasonally adjusted 0.7% in March, reversing a drop in February, the Labor Department estimated Thursday.

The producer price index has risen by 6% in the past year, led by a 23% rise in energy prices, the government agency said. It's the largest year-over-year gain since September 2008.

--------------------------------

I know you want me to strip out all the things I don' buy..

Housing is going up. Renting today means another lost opportunity just like the past decade.

Actually, on an after tax basis, the AVERAGE American does, indeed, pay 40% of their income towards housing. Where do you think that 25-30% pre-tax rule all rental brokers and large landlords use come from? Why do they set "affordable" housing, even for middle class people, at 30% of PRE tax earnings? Because the average New Yorker spends more like 40% PRETAX on housing. Making the 40% POST tax figure actually low for New York.

See: http://www.visualeconomics.com/how-the-average-us-consumer-spends-their-paycheck/

Housing, btw, is actually 35% of inflation, not 40%.

> Housing is going up. Renting today means another lost opportunity just like the past decade.

did dabulls just say "buy now or be priced out forever?"

please, please please....

"Higher prices for vegetables helped drive U.S. wholesale prices higher by a seasonally adjusted 0.7% in March, reversing a drop in February, the Labor Department estimated Thursday."

So, riversider, is your idea for a more accurate system to measure CPI based on vegetables?

Yes, your overall costs are 10% down, but because squash is up, I need to give you a raise?

Yes, there are other things in the CPI. But they all factor in to the total costs that workers will see.

Its just not logic to try and downplay the one WITH THE BIGGEST EFFECT.

Yes, it factors in a lot... because it IS THE MAJOR FACTOR!

"Actually, on an after tax basis, the AVERAGE American does, indeed, pay 40% of their income towards housing. Where do you think that 25-30% pre-tax rule all rental brokers and large landlords use come from? Why do they set "affordable" housing, even for middle class people, at 30% of PRE tax earnings? Because the average New Yorker spends more like 40% PRETAX on housing. Making the 40% POST tax figure actually low for New York."

exactly... so the CPI should reflect that.

What percentage of Americans own their homes?
What percentage no longer have mortgages?
Excuse me if I'm skeptical.

http://www.nowandfutures.com/cpi_lie.html

I am going to believe the commerce department, every central bank around the OECD and pretty much every nobel prize winning economist still breathing before some random website.

I ALSO know that I have read countless articles over the years saying that rent or mortgages take about a third of the average american's income. And so too does every REIT or large landloard not just in New York, but nationwide. Which is why they all have the same formula to determine how much rent you can afford. Same for the FHA and every bank that makes mortgages, FHA or not. And again, I trust them over your little website.

And yes kids, NYC people pay more than the national average, percentage wise:

http://www.bls.gov/ro2/ce9805.htm

May 03 (AFP) -- Americans saw prices rise two percent in
the year to March according to the Commerce Department's
personal consumption expenditures index published on Monday.
The figure, which is closely watched by the Federal
Reserve as a sign of broader inflation levels, is approaching
the maximum the central bank normally considers sustainable.
Energy and food costs rose 18.7 percent against March
2009, up almost four percentage points compared with February.

riversider, is that your personal site?

"I ALSO know that I have read countless articles over the years saying that rent or mortgages take about a third of the average american's income. And so too does every REIT or large landloard not just in New York, but nationwide. Which is why they all have the same formula to determine how much rent you can afford. Same for the FHA and every bank that makes mortgages, FHA or not. And again, I trust them over your little website."

Agreed. Housing is SO the major cost, I'm not sure why people want to ignore it in factoring cost of living. Amazing.

Didn't mean to burst your deflation bubble.

Here you go!
http://www.breitbart.com/article.php?id=CNG.f4ca4a183df2102e9ad9338f1c9b7c75.171&show_article=1

http://www.bloomberg.com/apps/news?pid=20601087&sid=alRnoxgR0soE&pos=6

May 10 (Bloomberg) -- Steelmakers, paying 90 percent more for iron ore, have to raise prices to pass on the higher raw material costs, the World Steel Association said.

The move by iron ore exporters this year to abandon a 40- year custom of setting annual prices in favor of quarterly contracts is a “very negative trend,” Chairman Paolo Rocca said in an interview in Beijing. The change and the higher costs that entails “will affect our customers,” he said.

Wasn't the US embargo of oil and iron ore going to Japan one of the major causes of them attacking the US and bringing us into WWII in the Pacific?