Tuesday, February 24, 2009

Chart of the Day: Housing Prices

When will the bottom come? What's the right price for housing anyway?

Of course there's no absolutely correct answer, but one of the things to consider long-term include the ability of the population to pay for housing. Housing costs can increase faster than incomes in the short-term, but in the long run prices are fundamentally limited by our overall ability to pay.

This chart shows an index of the ration between income and housing costs with 1987 set as 1. Higher than 1 means the cost of housing is relatively higher than it was in 1987, at least compared to income. By this measure the country is returning to a long-term average pretty quickly.

More interesting charts such as this as here.

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