Home prices across the pond

When I was in England and Scotland last fall, I fell in love with the idea of buying and running a bed and breakfast over there (if I could just get over the so-not-California winter weather). But, during my flight of fancy I never stopped to think about what it's like to be a first-time home buyer in Britain.

A recent blog post from The Economist journeys across the pond to see what home prices look like in Britain. According to Nationwide, home prices in Britain dropped 1.8% last month and the rate of decline is expected to accelerate.

Still, home prices are much too high for first-time buyers. The graph below shows the ratio of house prices to earnings for first-time buyers in London and Britain. The blog claims that either incomes need to double or prices have to halve for the market to stabilize.