The direction of US home prices continues to be a hotly debated subject. The e-mail on our recent post on the topic keeps coming. Many Armageddon forecasters are too young to have remembered the numerous stresses the US economy and housing have undergone in previous cycles - so this crisis truly feels like the end of the world. And why would you buy a home if the world is ending?
There is no question that the housing market continues to be vulnerable in the short term, particularly given the uncertain employment outlook. And if the US government hasn't been involved, one could argue the price declines have more to go. But the politicians and the Fed will go out of their way to stabilize the US housing prices.
More importantly, the prices may now be at the "pre-bubble" levels (at least with respect to the national averages) after a spectacular growth and a similarly drastic correction. The following chart shows the ratio of house prices to median household income.
It's not likely we will see significant price appreciation from this point on, but for those who are buying a home instead of investing in property, it's not necessarily a bad time to do so.