The numbers above are nominal prices, and then adjusted for inflation using some governmental measure presumably. One appears to be based on median prices, and the other on total transactions.
This method ("housing price / household income" ratio) has the advantage of integrating the effects of inflation and the general household revenues growth over the past decades and really illustrate the proportion of their income the French people must "devote" to housing.
The green plot is the "number of home sales with respect to their long term trend", and the black plot is "existing home sales price divided by household available income".
Friggit noted that over the past fifty years this ratio has been within plus or minus 10% of its long term trend (immediately nicknamed "the Friggit tunnel"), until 2002. The ratio peaked above 1.7 in 2007 and, after some hesitation, is now firmly plunging back.
You'll also note that the green plot (number of transactions) has historically anticipated the black plot (sale price vs income), and it's been firmly in coyote-over-the-Grand-Canyon mode for two years now.
We know where the housing prices are headed for the next couple of years. A large number of French households who have acquired their home at bubble inflated prices with thirty years plus mortgages, fueled by cheap credit, now run the risk of negative equity should they have to sell in emergency.
Europeans think a hundred miles is a long way. Americans think a hundred years is a long time.
Bernard:
if you plotted price against volume and represented the time coordinate by labelling the points of the curve, you would observe the system moving counter-clockwise in the diagram. This is typical of all bubbles.
Well, waddya know: there are such "escargot" diagrams available (we French love fancy graphs as much as the next guy, non mais! :)
Here's one from 1985 to 2005 (inflation adjusted), from the Bulle Immobilière forum; it mostly shows the 1990's bubble:
And a more recent one, up to e/o 2008:
If you like Jacques Friggit's work, you'll find all his documents in English on this page, including international comparisons with the UK and the USA (sadly, not with Spain). Europeans think a hundred miles is a long way. Americans think a hundred years is a long time.
And the price increase was purely in Zonedland, but when you average it it doesn't look as big as it was.
OK, I'm channelling Krugman here, but that's the idea. Earth provides enough to satisfy every man's need, but not every man's greed. Gandhi
One would think I would realize this, having moved from the San Fernando Valley to a Mid-South vacation and retirement area where the cost of real estate was ~20% of that in Northridge. But then, does not France and the U.K. also exhibit Flatland and Zonedland differences? Why are the leveling effects so pronounced only in the US? As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
The bulk of France population-wise is indeed Zonedland: major metropolitan areas, especially in the Southern half of the country.
The previous RE bubble in the 90's was mostly limited to the Paris metropolitan area. This bubble is more egalitarian (progress at last!): all medium and large cities and associated exburbs were affected.
Meanwhile, in Germany, there was no RE bubble at all. Property prices have even slightly decreased if I'm not mistaken. Europeans think a hundred miles is a long way. Americans think a hundred years is a long time.
