I get a queasy feeling looking at this chart. It is a feeling something akin to vertigo. Did house prices as a ratio of earnings really go that high?
According to the Bank of England, the answer is yes. Since 2003, the ratio was exploring uncharted territory, reaching levels that would have seemed impossible in previous housing bubbles.
The ratio is now quickly returning to planet earth. As it hurtles towards its long run average, it is going to leave an army of recent homebuyers holding permanently depreciated assets. Losses, defaults, and repossessions, this is what the future holds for the UK housing market.