At one level, the global Great Recession has been about the bursting of a tremendous housing bubble that saw a doubling in house prices in only 5 years, and close to 3 million houses being built in 2005 as the market peaked.
Last year, as part of the economic stimulus package, Congress passed an $8000 housing tax credit which had stabilized sales and slowed price declines. With the expiration of that credit, there has been a sudden decline in purchase mortgage applications, housing permits and starts. Prices look primed to resume a sharp decline, and there is talk of a double-dip recession as a result.
So, this seems an appropriate time to step back and take an updated "big picture" look at the state of the housing bust. As we will see, the big surprise is that, compared with historical prices, 4 years into the bust, Housing is STILL too expensive.
