It should go without saying that the Housing Market Crash of 2008 was instrumental in testing and developing key indicators to help measure the health and stability of the real estate industry, namely the personal housing market. One such indicator which could have predicted this self-inflicted economic downturn years before its actual occurrence would be a simple ratio of median home price to (annual) income. In most cases, if not all, the ratio of median home price to income generally exceeded one as it was (and still is) common practice to obtain a loan (preferably from a bank of sorts) when purchasing a home (mostly due to the fact that most house prices exceed the annual incomes of average homeowners).
Although the historic value of this ratio was 3:1 (internationally, anything below 5:1 is generally considered to be a relatively stable ratio) in continental United States and had risen to 4:1 in mid-2004 (the earliest time at which the housing bubble was beginning to exhibit some of its noticeable tell-tale uglier characteristics) as reportedly calculated by analysts in Credit Suisse, the housing market still crashed. This was attributed to the fact that the widely publicized ratio of 4:1 was considering data collected from the nation as a whole instead of individual locations. Indications were way grimmer than advertised when one considers this crucial ratio when segmented for individual American states and cities. It should be noted that the ratio of median house price to income in 2004 was 8.5:1 in Miami, and 10:1 in Los Angeles, a dangerous omen of what destined to occur in 2008, something which could be considered a grim consequence of unchecked greed and a wanton willingness to look the other way when questionable data is paraded as fact.
Despite the effects of this economic downturn still being felt in today's world, there's still a strong indication that history might repeat itself giving that we haven't learnt from our past mistakes.
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