1. Clearing price assumes efficient markets. My house in my neighborhood is one of maybe three (probably much less judging by the rental units friends of similar means live in) like it that will be available throughout the year.
I don’t agree a fake add will get the clearing price in these conditions.
Even if I put up an ad to rent a room in a student house -one of tens of thousands in a typical college town- the hypothesis fails since students are extremely sensitive to distance to their main building, nearby amenities, availability of parking, etc.
2. Even in the stock market the clearing price is dubious; the market cap of a company is a useful bit of fantasy. By multiplying the clearing price by the outstanding shares there is an implicit and incredible assumption that all the shareholders value the shares equally - which is obviously not true, some share-holders believe the stock has more promise, others are sentimental (the founder’s family members).
And that ‘price*shares == company worth’ is not true is evident in mergers and acquisitions which can be very acrimonious events. If the clearing price times the outstanding shares were a fair measure of the market cap, why would rational investors care about a merger except for the costs associated w/ closing?
But bringing this all back to the OP. Housing cost for the majority of the middle class is not meaningfully included in the CPI, except with a flawed metric.
1. Clearing price assumes efficient markets. My house in my neighborhood is one of maybe three (probably much less judging by the rental units friends of similar means live in) like it that will be available throughout the year.
I don’t agree a fake add will get the clearing price in these conditions.
Even if I put up an ad to rent a room in a student house -one of tens of thousands in a typical college town- the hypothesis fails since students are extremely sensitive to distance to their main building, nearby amenities, availability of parking, etc.
2. Even in the stock market the clearing price is dubious; the market cap of a company is a useful bit of fantasy. By multiplying the clearing price by the outstanding shares there is an implicit and incredible assumption that all the shareholders value the shares equally - which is obviously not true, some share-holders believe the stock has more promise, others are sentimental (the founder’s family members).
And that ‘price*shares == company worth’ is not true is evident in mergers and acquisitions which can be very acrimonious events. If the clearing price times the outstanding shares were a fair measure of the market cap, why would rational investors care about a merger except for the costs associated w/ closing?
But bringing this all back to the OP. Housing cost for the majority of the middle class is not meaningfully included in the CPI, except with a flawed metric.