Chart of home values from 1890 through 2006 (the chart is a misleading because it crops the lower end at 60 (not 0). The values go from 60-200 (it is an index showing the cost of the standard house in thousands of 2006 $s. House prices have ranged from $66,000-200,000 for the standard house from 1890 to 2006, and never above $130,000 until 2001. Larger view of the graph (via the New York Times) and the data set from Robert Shiller. Graph source: Irrational Exuberance, 2nd Edition, 2006.

Home prices certainly seem like a bubble there doesn’t it? Many news stories now talk about the bursting housing market bubble: The housing collapse heard round the world, Fighting Inflation and Housing Bubbles, Pop Goes the Real Estate Bubble, Bubble Blog, Once bubble bursts, cities feel the pain, Housing bubble has burst, Housing bubble is finally at bursting point…

I wrote about the housing bubble in April of 2005:

I am not convinced that we are seeing a bursting bubble. Certain location are at a risk to experience such declines (most of those areas went up more than 100% in the last 5 years so they still would have large gains over the last few years). The market certainly has moved to the point where a transition to a bursting bubble is much closer than it was a year ago. Even several years ago many proclaimed the bubble was ready to burst, in the face of continuing rapid increases in prices. Today we are essentially at a flat market but the momentum is all toward a decline in prices. So it is certainly possible this post will look foolish in 6 months or a year but I’ll take that chance.
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