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Thursday, May 30, 2024

What Is the CPI and How Does It Impact Households?

There is a lot of talk these days about the increase in the CPI, or the “Consumer Price Index”. The CPI is the measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. In other words, it measures the increase in the cost of everything we pay for – food, rent, automobiles, gas, loans, etc. There is a wealth of information available on the U.S. Bureau of Labor Statistics (BLS) website: www.bls.gov/cpi/

When the CPI increases, it impacts everyone because it means it takes more dollars to buy the same goods and services, and it impacts rent and mortgage rates. Many mobile home parks have rental agreements ranging from month to month, one year or longer terms. In the long-term agreements, annual rent increases are frequently tied to the change in the CPI.

It is really interesting to use the Bureau of Labor Statistics CPI Calculator located at https://data.bls.gov/cgi-bin/cpicalc.pl to find out how the value of the dollar has changed over the years. As an example, in 1965 when many Southern California mobile home parks were being built, the space rents were low, say $100 a month. In 2023, it would take $968.54 to have the same buying power as $100 in 1965, or the rent would have typically increased to nearly $1,000 if it was $100 in 1965. This calculator is for the entire USA and is different for various regions, but it provides a good example of how prices increase. Of course, wages have also increased over the years. In 1965, the California minimum wage was $1.30 per hour. Today, minimum wage is $15.50 per hour.

Source: State of California Department of Industrial Relations.

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