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This graph was derived from Professor Shiller's "Irrational Exuberance" data. I annotated it to demonstrate to all what it truly means to stabilize the housing market. The spike in prices was a "Destabilizing" effect. In essence, to stabilize the housing market, prices will have to drop considerably. Inflation adjusted wages and employment are not show here, but that needs to be thrown into the mix as well. No one is going to sell a house (at any price) if there is no one there to buy it. No one will be able to by it if they are not gainfully employed. As I stated in "Will someone tell our government that you can't legislate high asset prices? " and "I guess I need to go back to DC", you cannot legislate high asset prices with artificially low financing rates.

Click this graph to enlarge to print quality.


Be sure to read "Regarding Housing Price Decline, You Ain't Seen Nothing Yet" for a more empirically based opinion of continued housing price depression.