This is correct. To expound on this, bay area housing is very expensive vs rent because the market believes that the price of housing will appreciate. In other markets the cost of owning is nearly flat with renting after factoring in the down payment. In those markets, the market of buyers believes that housing will not appreciate to the same level.
You cannot include for sale housing in the index because the price paid is a speculation/estimate by the buyer (future looking)
You cannot include for sale housing in the index because the price paid is a speculation/estimate by the buyer (future looking)
Rent is a snapshot of today's price.