For many people, the big event is getting into the housing market. Once you’re in, unless you’re unlucky enough to live in the bottom group of the cities chart above, your house value guarantees that you can stay in. In all but the bottom group of the chart, the appreciation has been enough to keep current homeowners in their houses or allow them to move to a comparable city. The tragedy of the current sub-prime and expanding lender problems is that many people who were just getting their first homes will lose them, often through no fault of their own.

The major result of the run-up shown above has been to price many people out of the market, or to put them into smaller houses at higher prices. I bought my first house in Portland in 1972 for $30,000 and the median income was $11,000 or about 1/3 of the house price. Today the same house would probably sell for $1.5 million, and the median income is $58,500 or about 1/25 of the house price. None of my children can afford to live in that neighborhood, even though they’re all comparatively more affluent than I was then.

I can’t find it on the internet right now, but I’ve seen a graph for Vancouver (where prices have not plateaued) in which the real carrying costs compared with real average household income only reached its highest level ever in 2006. At other times prices were lower, but mortgage rates were higher, for example, so to the average family, homes required a higher percentage of their income than in recent years.

So the real question is what do homes cost families, not what do they cost in dollars. And, the more meaningful graph would be one that takes a generation-long perspective of 25 years +.

Then you could see which cities might really be ready for a bust, and which ones have prices in line with the long term average costs-to-families.