Category
The single biggest category in the Reality Index, and the place CPI's methodology choices have the largest impact on the headline number.
Housing is where the Reality Index and the official CPI diverge most. Home prices grew 6.84× from 1980 to 2025 per FHFA's House Price Index. Rent grew 5.37× per BLS's own CPI subindex. The Reality Index housing composite grew 6.11× — versus CPI All Items at 3.91×.
The methodological argument: CPI uses Owner's Equivalent Rent (OER) — what homeowners would theoretically pay if they were renting their own home — instead of measuring actual home prices and mortgage costs. OER systematically understates housing inflation when home prices rise faster than rents, which is essentially always since 1995. The Reality Index headline rate uses FHFA home prices plus Freddie Mac mortgage rates for housing carrying cost, not OER.
Each card below links to the full chart page for that item — including retail dollar series, BLS CPI subindex for that category, and the long-history backstop where available. Multiples shown are 1980-anchored unless the underlying data series doesn't extend that far back.
Home prices
FHFA House Price Index
Rent of primary residence
BLS CPI subindex
Composite construction. Equal-weighted average of FHFA House Price Index and BLS Rent of Primary Residence subindex. Both indexed to 1980 = 100.
What the headline rate uses. The Reality Index headline rate doesn't use this composite directly. Instead, it computes an all-in housing carrying cost: principal + interest on an 80% LTV mortgage at each year's actual rate (Freddie Mac PMMS), plus property tax (1.1% of home value), insurance (0.35%), and maintenance (1%) on a home valued at the 2024 median ($420,000) scaled backward by FHFA HPI. This produces a 4.32× housing growth multiple over 45 years — slightly lower than the simple price composite because falling mortgage rates from 1981's peak (13.7%) to today's roughly 6-7% offset some of the home price gains.
Why OER is contested. Owner's Equivalent Rent is the largest single component of CPI (about 26% of the headline rate). Its construction — survey homeowners about what they would pay to rent their own home, smooth the answers, deflate by amenity-adjustment — is methodologically defensible but produces a number that has lagged actual home price growth by ~3% per year since 2000. Critics have argued for decades that this single methodology choice is the largest source of CPI's understatement of real cost-of-living growth.