Note to my friends who are considering buying a house: for the love of god, spend a week reading The Housing Bubble Blog before doing anything rash.

Is one week enough? Should one spend even more time reading tales of falling housing prices and impending mass foreclosures? I admit that I’m undecided. Skimming through an endless series of downbeat stories is certainly depressing. You could easily become too bearish, and you don’t want to end up on the street carrying one of those THE END IS NEAR signs. On the other hand, bearishness is rational. Not only is it hard to argue with most of this guy’s ravings, but it takes a guy like him to counteract all the nonsense spouted by real estate agents, mortgage lenders, and financial pundits. You know, the ones who proclaimed that prices would never go down; the ones who encouraged sellers to offer free SUVs with their homes instead of lowering the asking price, in hopes of disguising the decline; the ones who even now are predicting a “soft landing”.

My personal take is that housing prices are going to fall until people can actually afford them. What price is “affordable”? Take a look at this graphic, from Wikipedia, for a strong hint. History shows that inflation-adjusted home prices increase very slowly: in the US they went up 0.4% per year from 1890 to 2004. in Amsterdam, they have gone up 0.2% over the last 3.5 centuries.