Popping a housing bubble fantasy

Unless you believe that we are going to get double digit inflation and 17 per cent mortgage rates, which most observers think are near impossibilities, the housing market benchmarks of the 1980s are irrelevant to home owners in the second decade of the 2000s. The same principle applies to The Economist’s analysis.

It would, of course, be wonderful if our ever-changing, multi-dimensional world could be judged by crude long-term ratios that blissfully ignore all sorts of key facts. Unfortunately, that's just a recipe for confusing further an issue that already has many confused.

Looking ahead, it is highly likely that Australian house prices will track household earnings in what PIMCO's Bill Gross has aptly described as the 'New Normal'.