REDNews January 2015 - Southeast Cover January 2015 | Página 28

REDNews

DOES CPI REFLECT

YOUR REAL COST OF LIVING?
Colliers International - Houston
BY MARTIN O’MALLEY

Martin O’Malley

Martin O’Malley is a Senior Vice President
with the Houston office of Colliers International.
As a real estate broker, he has specialized
in Investment sales for over two decades.
His focus reflects a long standing interest in
both finance and investments. A proclivity
for analyzing numbers is not confined to
understanding his clients’ financial results, but
also to comprehending the macroeconomic
background and its effects on commercial real
estate. The frequent use of CPI in commercial
real estate leases has made it a topic of
particular interest to Mr. O’Malley. Reading in
the popular financial press of changes made to
CPI has caused him to delve into it in depth.
He holds an undergraduate degree in finance
from the Wharton School at the University of
Pennsylvania and graduate degrees in law and
business from the University of Michigan Law
School and Rice University respectively.

The Bureau of Labor Statistics (BLS) recently
published its Consumer Price Index (CPI) for
October 2014 showing inflation for the last 12
months was 1.7 percent. But you’ve likely noticed
that number is a fraction of the price increases you
face every day, whether shopping at the grocery
store, paying for medical care, or purchasing any
of the myriad other things necessary to sustain you
and your family. How can that be?
Over the last three decades the federal government
has drastically altered how CPI is calculated,
both by Congressional action and bureaucratic
initiative. The Reagan Administration made
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the first significant change. Seeking to lessen
the effects of rapidly rising single family home
prices, it substituted a theoretical BLS calculation
of the rental value of owner-occupied homes for
a component based on the ac X[