Median House Price / Median Income, inflation adjusted

Median House Price / Median Income, inflation adjusted

Since 1975, the ratio between median house prices and median income fluctuates between 3 and 3.6. In 2000-2001, however, with cheap credit and risky loan practices, prices skyrocketed and the ratio reached 5.5. The 18% drop in the median house price in the first quarter of 2008 did little to bring things back to normal.

Even assuming the same median income for 2008 as in 2007, we are still at a ratio between 4.3 and 4.4, much higher than historical averages. Median prices would have to get to $190,000, losing 32% off its peak in 2006.

UPDATE: check the forecast based on the Case-Shiller Index and the bell-shaped figure that is forming.

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