The Financial Times reports on the new Harvard study. "Markets seldom disappoint both bulls and bears for long. But over the coming years the US housing market looks likely to do just that, according to a study by Harvard University. 'Although housing prices are stretched, it is hard to see the catalyst for a crisis in the market,' says Nicolas Retsinas, director of the Joint Center for Housing Studies at Harvard."

"'The overvaluation looks pretty well balanced by longer term supports for house prices, so we may just see a few years with little action. Houses will revert to being something to live in rather than money makers,' he said."

"Over the past five years house prices have outstripped income growth more than sixfold, the median home now costs more than four times median household income in 49 out of 145 metropolitan areas in the US, a record. In 14 metropolitan areas, the median house is now worth more than six times median income. Last year saw the average house price shoot up 9.4 per cent, the biggest rise in the average house price since records started more than 40 years ago."

"The strongest underlying support for the market comes from accelerating household formation. Demand is being driven not only by population growth but by household fragmentation, as couples divorce or children leave home."

"Not everyone concurs, however. Many economists say national figures are deceptive, since they obscure pockets of extreme over-valuation in property prices and greater vulnerability to rising rates. Others point to evidence of overbuilding in recent years. Residential investment has risen to 6 per cent of gross domestic product, its highest level in 50 years and much higher than the average of 4.75 per cent."

The Boston Herald. "New figures show Greater Boston housing is less affordable than ever, with a median-priced home costing nearly six times what the average family makes per year."

"'Affordability problems are worsening,' Harvard University researchers write in their annual study, due out today. The report found that a median Hub-area home sold for 5.9 times local median household income last year. That’s up from 3.2 times median income in 1994, as well as about two times median income in the 1950s."

"Affordability also dropped to record lows in all three other Bay State areas measured: Barnstable/Cape Cod, Greater Springfield and Greater Worcester. All told, researchers found that more than one Massachusetts household in three spends at least 30 percent of family income on housing. Worse, nearly one family in six pays at least half of everything earned."

"'The problem of affordability is not just a low-income problem any more. Middle-income families are facing affordability problems as well,' said Nicolas Retsinas."

"The study found Greater Boston municipalities issued just 7,974 building permits for new houses last year, a 16.6 percent drop from 1994. The good news: Retsinas said a lack of excess construction means prices in Boston’s jittery housing market aren’t likely to collapse."

"The expert said researchers found sharp price drops usually require a combination of overbuilding and big job losses. 'While there clearly will be a softening and flattening (of Greater Boston house prices), it’s unlikely there will be steep falls in the single-family market,' Retsinas said."

"However, he conceded that the Hub’s condo sector, which has seen lots of construction in recent years, 'may be oversupplied.'"