House prices, according to Mum and Dad

dougk_2

Hereward wrote:

the economy has somehow absorbed some of this this cost to help keep prices down.

Not only have they absorbed the costs but many companies (Supermarkets in particular) have posted higher and higher profits. When these companies start making losses then its time to worry!

sanfrancisco

Hereward wrote:

Using your example about the trebling of the cost of a barrel of oil then all goods sold in the economy should have increase by a similar percentage of the oil.

Why? What evidence do you have that this is the case?

Hereward

sanfrancisco wrote:

Why? What evidence do you have that this is the case?

It post 35 you stated that "With oil going up so much over last year or two this feeds into EVERYTHING." This implies that the price of goods is proportional to the cost of oil; therefore, if the price of oil has trebled since 2001, then it’s a fairly safe bet that the price of goods would have risen by a similar amount. This clearly didn't happen as the price of most goods is definitely not three times or even twice the price they were in 2001 (there will be a few exceptions, energy prices for example, but these are very much in the minority, and in the case of energy prices these are tied to the cost of oil).

Guy_Montag

Getting back on topic, one major issue with this graph is the introduction of the fudge factor. We don't know how much the fudge factor is, only "In addition, using earnings as a measure of income ignores the effect of an important structural shift over the past two decades - the rise in the number of two-earner households."

So at some point, they stop taking the single salary as a measure of affordability & instead use two salaries - or as I like to say completely change the rules.

dougk_2

Actually to reinforce what Hereward has said, I can't think of many things going up in price (certainly not ahead of inflation over the last 5 years) with the exception of energy supplies, houses and taxes (eg Council Tax). I would say the opposite is true with many things reducing in this period such as electronic goods, cars, cd's, dvd's, clothes (if you are not into designer ones) to name a few.

dougk_2

Guy_Montag wrote:

So at some point, they stop taking the single salary as a measure of affordability & instead use two salaries - or as I like to say completely change the rules.

Perhaps they will look at affordability models that are tailored to invididuals too..... one for people who are not into holidays, designer clothes, all the gadgets, going out every night etc etc and one for those people who are the opposite who consider having fun being more important than looking to the future.

Guy_Montag

dougk wrote:

Actually to reinforce what Hereward has said, I can't think of many things going up in price (certainly not ahead of inflation over the last 5 years) with the exception of energy supplies, houses and taxes (eg Council Tax). I would say the opposite is true with many things reducing in this period such as electronic goods, cars, cd's, dvd's, clothes (if you are not into designer ones) to name a few.

The difference between the first lot & the second lot are, we have to pay for the first lot. The second lot are optional.

dougk_2

Guy_Montag wrote:

The difference between the first lot & the second lot are, we have to pay for the first lot. The second lot are optional.

You see it that way , but many don't!

Food is also somewhlat cheaper in the main with greater supermarket competition.

sanfrancisco

Hereward wrote:

It post 35 you stated that "With oil going up so much over last year or two this feeds into EVERYTHING." This implies that the price of goods is proportional to the cost of oil.

It doesn't at all. Not at all.

I am pleased that you personally are not experiencing rampant inflation. I hope this continues for you.

Norbert_Colon

therefore, if the price of oil has trebled since 2001, then it’s a fairly safe bet that the price of goods would have risen by a similar amount

That would only happen for goods where oil-based costs made up 100% of the price.

Even petrol for example hasn't trebled in price, because a large part of the pump price is made up of taxes, distribution costs etc, which haven't trebled.