Our global index of house prices a weighted average of prices in 52 countries—shows no sign of an uptick. The equally-weighted index moved sideways during the first quarter of 2012 and the GDP-weighted index continued to decline. The global index continued to mask very different developments across countries. House prices have fallen over the past year in just over half of the countries and risen in the rest, in Asian countries in particular. The ratio of house prices to income and the ratio of house prices to rents are two indicators that give a sense of whether prices are likely to decline or rise. The price-to-income ratio is the basic affordability measure for housing in a given area and the price-to-rent ratio compares the total costs of homeownership vs. the cost of renting a similar property. If these ratios are above their historical averages, economic theory suggests that house prices may decline in the future. An econometric model of the determinants of house prices, used in the working paper by Igan and Loungani explains house price growth based on several short-run factors, such as growth in incomes, asset prices, and population, and long-run-factors, such as the ratio of house prices to incomes. The difference between house prices and those predicted on the basis of these fundamental factors gives another indication of whether prices may have more room to fall. The results from this exercise show that in many countries the declines in house prices over the past five years (the „actual‟) are close to, or even exceed, what was predicted by the model. But for many countries, house prices are still resisting the predictions of the model. With house prices falling substantially over the past few years, housing affordability improved in most U.S. states last year. In most U.S. states, a family making the median income for the state could afford the median house (Chart 5). There were still a few states, along the coasts, where the median house still remained out of reach of the median household. A similar picture emerges when looking at price-to-rent ratios by metropolitan areas: house prices remained out of line with rents in some areas along the coasts.