Fake house prices may have caused economic collapse.

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 During the last few years, the US economy has significantly declined. Many have blamed this on many things such as the war in iraq, bad loans, etc. how ever, After researching statistical data, think this was caused by incorrect real estate values. Throughout the early part of this century, home prices have risen significantly for apparently no reason. I believe that in the last 18 months, home prices have not really declined, just that homes were never really worth what we were paying for them in the first place.

 In 1995 The average household salary was $44,938 and the average price of a home was about $150,000. So an average house cost about 333% of the average yearly salary in the united states. If you look at historical data from 1965 on, the average home price has always been around 325 - 350% of the average household income.

 This 350% range continues until 2000, where the average price suddenly jumps from 337% in 1999 to 357% just 1 year later. In 2002 The price of a home was 388% of the average household income. In 2004 458%. Right before home prices started to fall in late 2006 / early 2007 it was up to 462% of the average household income. over 100 percentage points more the the statistical average from 1965 to 1995.

 For a family to move into a middle class neighborhood in 1995, the average price of this house would be $160,000 or $1,064 per month. Assuming this family had a household income of $70,000, This would mean after taxes and the mortgage payment, they would have about $2,824 left over per month for clothes, food, utilities, etc.

 Now fast forward to 2006 where this same house now would cost around $300,000. Assuming this family's salary increased by the national average, or an annual income of $93,100, Their payment would be around $2,000 per month and now would bring in as a family $3,172. This is $348 more than in 1995 However it is the equivalent to just $2,384 in 1995 dollars. If the home prices were proportionate, in 2006, this family should have had  $3,756 in disposable income per month, or a total of $7,007 more per year.

 Assuming the government compensated every household with with this percentage loss of their income, It would be the equivalent to a  1.81 trillion dollar stimulus package just for the year 2006 alone. To fully compensate for the un-warranted increase in home prices since 2000, this would lead to a $7.10 Trillion dollar stimulus check for 2000 through 2006. This is not including 2007 or 2008 however complete data is not enough to correctly calculate just how much that would be. However based on home prices in 3 major cities over the last 2 years, this would be just under $1.7 trillion more bringing the total to $8.8 Trillion.

 Home prices still are not at the 350% or 3.5:1 range yet, however assuming the continue to decline at the current rate , we should reach this in the next 4 to 5 years.

Researched & Written by: Steffan Perry