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Long term interest rates have been falling for five months and are still at historically low levels. The cost of housing takes a smaller chunk of our budget today than it did a generation ago.

Compared to incomes, housing prices are outrageous. They are only affordable through exotic, interest only loans. Property appreciation of 30% per year is not an indication of low cost of housing. It has gotten to the point where people can't move. If they move, their wages haven't kept up with rising house prices so they can't afford a new place, even with the equity they have in their current home. Of you are a 1st time buyer, you will have a very hard time.

Is that why our household net worth is at record levels and has almost doubled during the last ten years?

That's net worth on paper only and has home equity as the biggest driver. Increasing home values is not a wealth producing industry. Manufacturing and adding value to products is where wealth is created.

>>>Manufacturing and adding value to products is where wealth is created.

So a product like software has no intrinsic value? Why is intellectual property valued at all, if only manufacturing adds value?

Compared to incomes, housing prices are outrageous.

I realize that's a popular sentiment but feeling don't help much when trying to understand what's really going on out there.

Expat-Panama has already crunched the numbers and made the comparison. Given that our homes and incomes are larger today, it's clear that homes are more affordable now than they were in 1978.

Originally posted with back up here.

Even the libs at the NY Times had to report the truth on this issue.

Twenty Years Later, Buying a House Is Less of a Bite

From the article:

Nationwide, a family earning the median income - the exact middle of all incomes - would have to spend 22 percent of its pretax pay this year on mortgage payments to buy the median-priced house, according to an analysis by Moody's Economy.com, a research company.

The share has increased since 1998, when it hit a low of 17 percent before house prices began rising sharply in many places. Although the overall level has reached its highest point since 1989, it remains well below the levels of the early 1980's, when it topped 30 percent."

They are only affordable through exotic, interest only loans.

More feelings. The fact is that 80% of all mortgages are fixed rate mortgages.

Property appreciation of 30% per year is not an indication of low cost of housing.

Where did anyone make that claim?

It has gotten to the point where people can't move.

Nobody's moving?

If they move, their wages haven't kept up with rising house prices so they can't afford a new place, even with the equity they have in their current home

So, if I keep my same job and move from my expensive house in Florida to a small town in South Carolina I won't be able to afford another home and my wages will drop?

Of you are a 1st time buyer, you will have a very hard time.

Is that why home ownership is at an all time high?

That's net worth on paper only and has home equity as the biggest driver.

Oh, really? Have you ever seen the Fed's Flow of Funds report? If you had you'd know that homeowner equity only accounts for about 21% of our total household net worth. We own a lot of liquid assets.

Flow of Funds (page 110)

Increasing home values is not a wealth producing industry.

All that demand for housing hasn't created any wealth? All that money I made owning builder stocks from 2001-2005 was imaginary? The equity I banked when I sold a home in 2003 didn't really help me accumulate wealth?

Manufacturing and adding value to products is where wealth is created.

The service industry creates no wealth? Do you have a source you can link us to that proves this bizarre claim?