I have an older mortage, at a low interest rate and because I am retired I still struggle so this explanation sucks. The fact is that prices have risen MUCH faster than most peoples income.
The cost of used cars have gone way up along with the cost to borrow money for it.
4 years ago one of my grandaughters bought a used car while she got good service out of it the thing is pretty well shot and needs a lot of work (read MONEY). She is looking for another car. In todays used car market a vehicle with about the same mileage as her old one had when she bought is more than twice the cost and along with the increase in interest, it is getting really hard to find a good one at a price she can afford.
Keep in mind that in the 70's all interest was also deductable on taxes along with even job specific clothing costs.
https://www.nysun.com/article/americans ... 2024-03-29
...For months now, Americans have been told that inflation’s downward trend, to around 3 percent from almost 9 percent annually, should make them feel good about the economy. Yet it isn’t working. A recent Gallup poll found that 63 percent say the state of the economy is getting worse and 45 percent think it’s already “poor.”
One reason, many have speculated, is that while the rate at which prices are rising might have slowed considerably, prices remain very high. Food and rent in particular are still expensive. These prices are felt everyday by Americans when they pay for their housing and go to the supermarket.
Only that’s not all. A new study from the National Bureau of Economic Research by economists Marijn Bolhuis, Judd Cramer, Karl Schulz, and Larry Summers finds that a change in the method used to estimate inflation today, compared to the method used in the 1980s, might well cause an underestimation of the true level of inflation.
The paper — “The Cost of Money Is Part of the Cost of Living” — highlights the overlooked impact of the highest borrowing costs consumers have faced in decades. From mortgages to car loans to credit-card debt, those costs are up.
As the authors explain, the pre-1983 measure of inflation — the Consumer Price Index — counted the price and interest rate Americans paid to buy housing. The newer measure is based on what it costs to rent housing.
Another way to think about it is if you buy a house this month, the monthly payments will be much higher than if you bought one three years ago. The same is true of a car or other purchase. Yet measuring inflation based on rental costs, which may not incorporate the sky-high interest rates of a new purchase — doesn’t reflect that difference.
As Mr. Summers, who was the Treasury Secretary under President Clinton, noted on X, formerly Twitter, “Pre-1983, mortgage costs were in the CPI as were car payments pre-1998. Now, price indexes do not include borrowing costs. Thus, when interest rates jumped last year, official inflation did not fully capture the effects it would have on consumer well-being.”
Indeed, if we measured inflation as we did in the 1970s, the inflation that started in 2021 would have peaked at 18 percent — double its reported peak. That’s higher than the worst of the 1970 and 1980s. Inflation’s current annual rate would be about 8 percent....