According to the Case Shiller indices of housing prices, the housing market has been consolidating for the past three years, and that comes after 3 years of the most brutal collapse in home prices in modern times. Altogether, the housing market has undergone six years of intense adjustment. With prices stabilizing (and even going up in some markets) and housing starts up fully 65% since early last year, there's ample reason to think that we've seen the worst, and that the housing market is now getting back on its feet.
Both of these indices of housing prices show year over year gains: the Case Shiller index is up 3%, and the Radar Logic index is up 5%. Moreover, both indices are relatively unchanged for the past three years.
From a longer term perspective, housing prices appear to have come back down to earth in a big way. Over the past 25 years, housing prices have risen only 15% more than rents, and that seems quite reasonable considering that 30-yr fixed rate mortgages have fallen from over 9% in 1987 to only 3.5% today. It's not a stretch to say that housing has never been more affordable. If anything is holding back the market now, it's the fact that banks are still risk-averse in their lending practices, and regulators have also tightened lending rules.
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