"Pop" is not just one of the Rice Krispies

I tend not to write much on the housing bubble, but today's story about how salaries continue to lag behind increases in home prices deserves notice. As much as the economy may be recovering, and as much as stocks may be doing better, the cost of housing and the cost of health care--both outpacing inflation and real wage growth--continue to make it hard for the working poor and the middle class to makes ends meet neatly. Throw in the price of gas and new, restrictive bankruptcy rules, and, well, we have a recipe for disaster when the bursting finally comes.

What disturbs me most, though, is the news that the median home price--that's with an equal number of houses more and less expensive--is nearly $200,000. It's bad enough that my house has increased 25% in value since we bought it, meaning we probably couldn't afford it now; there's no way that we could reasonably afford that median price, even with two incomes, without something dangerous like an interest-only loan or additional home equity borrowing. I know that I am not rich, and never will be on a public school teacher's salary, but I do know that my wife and I are above the median in household income. So how can that level of median home price be anywhere near sustainable?