{
  "id": "1997-august-stats-from-the-road",
  "slug": "1997-august-stats-from-the-road",
  "url": "https://dwillis.github.io/uplink/article/1997-august-stats-from-the-road.html",
  "year": 1997,
  "month": "August",
  "monthNum": 8,
  "headline": "Stats from the road",
  "kicker": "To adjust or not to adjust",
  "author_name": "Sarah Cohen",
  "author_title": "training director",
  "affiliation": "NICAR",
  "summary": "A journalist questions the methodology of adjusting home prices for inflation, arguing that housing prices shouldn't be adjusted using traditional inflation measures since homes are treated as financial transactions rather than consumption in government economic data.",
  "keywords": [
    "inflation",
    "housing",
    "economics"
  ],
  "topics": [
    "Data & Databases",
    "Investigative Methods",
    "Journalism & Newsroom"
  ],
  "technologies": [],
  "full_text": "Stats from the road\n\nTo adjust or not to adjust\n\nThe subject came up again recently in a private e-mail. A writer wanted to know how to adjust the change in prices of homes for inflation.\n\nThe underlying question makes some sense. Have home prices outpaced more general inflation over the past 10 years? But the question got me onto my soapbox.\n\nIf inflation is defined as the increase in prices, how can you adjust them for inflation? It's like expressing a murderer's prison time as the difference from the average felon's. OK. Housing prices, like stock prices, are different.\n\nBut I doubt many reporters know why. The reason is that these investments aren't counted in traditional inflation measures, like the Consumer Price Index or the Gross Domestic Product's implicit price deflator.\n\nHome purchases are counted as purely financial transactions, not consumption or useful production, so they're excluded from virtually all of the government's inflation and production figures.\n\nWrong question\n\nOne answer to the correspondent's question is, \"Do something else.\" Another writer asked a seemingly more relevant question: How would you measure how affordable homes are today, compared with a decade ago? That's easier, and easier to explain. A simple approach is to is find the median home price for your area for a year, and divide it by the median income for that year. You'll something that tells you how many years' income the typical family would have to pay to buy a typical home that year. More accurately, you'd factor in the cost of buying a home by adjusting for interest rates, insurance requirements, and local tax changes over time. You may not even have to do the work. The National Association of Home Builders has an index called the Housing Opportunity Index. It compares affordability in 190 metro areas, and includes property taxes, interest rates and closing costs in its calculation.\n\nInflation consideration\n\nIf you decide to go ahead with the inflation-adjustment, though, here are some things to consider:\n\nFirst, decide which year you want to express your dollars in. I usually choose the most recent year available, because our readers and viewers are intimately aware of how much a dollar buys today.\n\nThey get fuzzy when you ask them to go back in history. They attribute halcyon days of low prices and prosperity to every year before about 1990.\n\n(Economists and statisticians will tell you that you have to use the base period of the deflator as your reference period. That's getting a bit picky for my taste.)\n\nThe next question is whether to use local inflation rates or national ones. Most places you won't have a choice. There are only about 15 metro areas that have published inflation figures.\n\nNext, just to be picky, find out the month that your home prices were collected. There are usually two types - an end-of-year value and an annual average. Many people gravitate to the annual average, while I gravitate toward the end of the year.\n\nWhy? A year is a long time. You'll mush together a lot of information if you use an annual average.\n\nAnnual averages will also lag consistent trends. If home prices rise a steady 0.3 percent a month, then your annual average will be somewhere near the June level, not the December level.\n\nThe big issue, though, is to stay consistent. If you use averages for one year, use them for all years. That way you won't confuse seasonal patterns with more meaningful changes.\n\nNow you have your reference period: December 1996, if that's possible with your home prices. And you want to compare it to, say, December 1986.\n\nLook up the CPI or the GDP deflator for the years you want to use. If you want annual numbers for a graph, just pick them all up. You can get the CPI at the Bureau of Labor Statistics' Web site for free.\n\nIf you subscribe to STAT-USA (about $100 a year from the Commerce Department) you can also get the GDP deflator for consumer expenditures, which some people think is a more accurate but quarterly version of the Consumer Price Index.\n\nMedian home prices are a little harder. The federal government only publishes median prices for new homes, not the vast majority of existing homes that are sold each month. Those are from the National Association of Realtors and some other real estate research companies. Locally, you can probably get your local real estate sources to give you historical data.\n\nExisting home prices rose from about $80,300 to $118,000 for the decade ending last year, according to the national consultant used for the NAHB Housing Opportunities Index. The CPI for All Items rose from 109.6 to 156.9 over the decade. Here's how to calculate the change in home prices, adjusted for inflation.\n\nInflation-Adjusted: = CPI then) Value then Putting it into numbers, then: CPI annual average for 1996 = 156.9 =1.432 (or so) CPI annual average for 1986 = 109.6\n\nSo home prices for 1986 expressed in 1996 dollars = 1.432 * 80,300 = about $115,000 So real home prices, as the economists call them, have risen only $3,000, or 2.6 percent, over the decade. Not such a good investment, when looked at under those conditions. That's less than 0.3 percent a year. Having done this calculation, though, what does it mean? It doesn't take into account changes in the nation's housing stock, like the trend toward bigger homes or longer commutes. It doesn't take into account the payments that people have to make, including lower interest rates. Nor does it take into account tax caps that have made new homeowners pay more tax at the expense of more stable families. Finally, when you compare it to other products gasoline, furniture, clothing, or even computers, you usually don't think of those prices after inflation. So use it with care. Sarah Cohen can be reached at (301) 942-2199 or e-mail her at sarah@nicar.org",
  "provenance": {
    "extracted_by": "anthropic/claude-sonnet-4-6",
    "extracted_at": "2026-07-05",
    "verified": true
  },
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