The Real World Is Nominal, Condo Fee Edition

City Vista

I got an email from my condo board last night saying that the draft of the 2013 budget is ready and they’re expecting us to pay fees that are 3 percent higher in 2013 than we paid in 2012. That’s similar to the overall national level of price inflation and well below the local pace of housing cost increases. So as far as I’m concerned, there’s nothing more to be said.

But because the real world is nominal, the email actually contained a substantial and somewhat defensive explanations from the board about why this was necessary. They even noted that this is in part just an accounting switch because fines and late fees are no longer being counted as projected income (apparently we now assume perfection) which isn’t a genuine increase in operating costs. And good for them! It’s nice when people explain themselves. But it’s a nother reminder that practical real-world financial decisions are usually made and discussed in purely nominal terms. Under the circumstances, how could nominal shocks not have real effects?