There can be no doubt that home prices have moved way down from the 2005-06 peaks. How did I reach the conclusion that, even after a 33% decrease in prices?
By using traditional metrics. Whether we are looking at US housing stock as a percentage of GDP or Median income vs home prices or even ownership vs renting costs, prices remain elevated. Indeed, we see prices remain above historic mean.
Consider price relative to income. From 1977 to 2010, the median US home price was 4.1 times median household income. But as the chart below shows, Home prices are still above that mean. Oh, and that mean is artificially elevated due to the 2002-07 boom. Same with home prices relative to rentals, or housing value as percentage of GDP.
And prices could fall a VERY long way.
Further, we should not assume that prices will merely mean revert back to historic levels. In most markets, a near 3 standard deviation price move is resolved not by reverting to the mean, but by by careening far below it.Both the Bushies and the Obamites seem to think that with enough Gummint propping and cheerleading (and forebearance-of-foreclosures, and threats), that housing prices will recover.
Naturally, the Banks, GSE's, and Realtors are very much in favor of WHATEVER it takes to prop up home prices (read: collateral and commissions.) Local governments which use property taxes are equally interested in propping up housing values.
Finger in the dike, boys. It ain't gonna work.