There has been much ballyhoo over the current housing slump. While it's easy to blame it on the economy, or the mortgage companies' lending practices, the truth isn't quite that simple. The problem is, even with a so-called housing slump, housing costs are still over-inflated compared to historical averages.

According to Zillow.com (which I'm sure isn't 100% accurate, but gives you a good idea), housing prices in Phoenix in Jan. 2004 averaged around $135,000. By Jan. 2006 the average had jumped to nearly $240,000, before "slumping" to the current $220,000 range. Sure, that's only looking at Phoenix, but the rest of the U.S. has gone through a similar trend (except a few parts of the U.S. which somehow avoided this meteoric rise in housing). Again according to Zillow, the average home value in the U.S. in Jan. 2004 was around $175,000, and by Jan. 2006 had peaked around $240,000 as well.

In fact, if you look further back, in 2005 the Office of Federal Housing Enterprise Oversight had concluded that over a 5-year period housing had appreciated over 75% in at least 8 states (over 100% in California and the District of Columbia). To put this in perspective, the popular number that has usually been thrown around for historic housing appreciation is 5% (in Minnesota, for example, the average appreciation over a 23 year span from 1980 through 2002 was 4.7%, before increasing to roughly 10% a year from 1999 through 2002).

That's a lot of numbers to be throwing around, so I'll get to my point. As everyone has been stating, prices have actually depreciated over the last year or two, but not as much as would adjust the market to where it should've been if it had followed its historical average. For anyone that bought at the pinnacle of the housing boom, especially those that were hopeful it would continue in that trend, then obviously they're feeling the heat of this current downturn. But the fact of the matter is that we brought a lot of this upon ourselves; since we were the ones buying and selling houses above market value. The big problem isn't that houses appreciated like crazy, it's that it lasted for a five to seven year span. Toward the end of this housing surge most people that was at least a year or two from being ready to buy a house had to make a choice: buy a house now, or wait another year or two when housing costs might be even higher. I don't blame them for choosing the first option, but it certainly hasn't helped the situation (and is a big cause for the current mortgage crisis).

Information from http://www.thinkingapplied.com/nestegg_folder/nestegg.htm, Zillow.com, and http://findarticles.com/p/articles/mi_m1365/is_2_36/ai_n15677650 were used for this article.