Just about one year ago, I asked if the housing bubble and various bailout proposals would be the sleeper issue of 2008. (See related rants here, here, here, here and here.)

Michael Hill, the president and chief executive of a luxury home builder, writes today in the Washington Post:

The real problem is affordability and the incongruity between incomes and home pricing.
Forty years ago, the median national price of a house was about twice the median household income. In some parts of the country, this ratio was closer to 1 to 1. Twenty years ago, the median home price was about three times income. In the past 10 years, it jumped to four times income.
But in most major economic centers, typical families haven’t been able to buy a home for anything near the national median price for decades. Try to find a single-family home in the D.C. area for the national median of $221,900…

I’m not sure if I’m on board with Hill’s defense of subprime lenders elsewhere in the editorial. But I do think the figures behind his argument ring true, and I find it tough to argue with his conclusion that the median price/median income disparity isn’t likely to balance out anytime soon.

Consider Silicon Valley, home to much of the driving force for our economy in the ’90s. Today the median price of an existing home in Silicon Valley is $775,000, but the median household income there is only $62,020. A home in the area costs almost 13 times annual income. Home prices in that market would have to drop nearly 70 percent or income would have to triple, and interest rates would have to stay low for the price-to-income ratio to reach a more affordable level. Here in the Washington metropolitan area, the median home price is about eight times the median household income. Income-affordability ratios are similarly out of balance in Boston, New York, San Diego and the other areas hit hardest by the current crisis.
Without mortgage options that provide lower monthly payments than traditional 30-year mortgages, a majority of families cannot afford homes in our nation’s major population centers.
Today’s crisis differs greatly from previous housing downturns. In past downturns, the housing market was influenced by and was an indicator of other economic issues. This time, millions of homes have been built around the country during the past few years using a financing option that no longer exists. There may never be enough capacity to absorb all of these homes and other existing homes using 30-year mortgages, because there simply aren’t enough people with the incomes to meet the requirements. Prices could not roll back far enough without damaging the economy irreparably.

Hill wants a new mortgage option. (A 40 year mortgage? A 60 year one?)

From this roundup:

Hillary Rodham Clinton: Would expand government-lending programs to stabilize the mortgage market and set up a $1 billion fund to assist state programs that help at-risk borrowers avoid foreclosure. Wants laws to crack down on unscrupulous mortgage brokers and abuses in mortgage lending.
Barack Obama: Supports comprehensive legislation to combat fraud and abuse in the mortgage industry. Proposes a fund to help people refinance mortgages and offset the cost of selling homes. Would waive certain federal, state and local income taxes that result from the sale of homes to avoid foreclosure.
John McCain: Generally opposed to federal intervention but says the crisis may require measures to limit the fallout and to assist the truly needy. Wants more consumer education and more rigorous regulatory enforcement.

More from McCain, when he was in Florida:

“We are paying a price for violating one of the fundamental principles of economics: Don’t lend money to people who can’t pay it back,” McCain said at Baker Manufacturing, which makes fiberglass bath and spa tubs.
McCain suggested cracking down on predatory lenders and mortgage brokers that “deceived people” as well as rating agencies “that gave high ratings based on nothing I know of.” He also talked about making the mortgage process easier to understand and more transparent. “Why shouldn’t (a mortgage document) be one page, and at the bottom say I understand this document?”

I like what McCain is saying, but many Americans who bought more house than they can afford will be saying, “help me out, federal government, help me out!”