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Housing price update

Housing prices in major metropolitan markets on average are down almost 30% from their highs. But for the past 28 months, housing prices have been relatively stable, despite many predictions that they would suffer another collapse as defaults and foreclosures ramped up.

In real terms, prices in 10 major metropolitan markets are down about 38% from their highs.

Fixed-rate mortgage rates have declined from a little over 6% in 2006 to just over 4% today, and that translates into a 22% reduction in a homeowner's monthly mortgage rate for a given amount of borrowing. Added together, the decline in real housing prices and the decline in mortgage payments have reduced the effective cost of buying a house by about 50% in the past five years. That's a huge price adjustment, and it has served to clear the market. It's tough to imagine that housing will get much cheaper than it is today.

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