"The head of real estate strategy at Macquarie Capital, Rod Cornish, uses an affordability measure that brings together the mortgage rate, the level of house prices and the ability of households to pay.
Many will have seen the Cornish graph already. It is easy to follow: when affordability falls, so does housing activity; when affordability rises, housing follows.
All the elements of affordability are now moving the right way.
House prices have dropped. Mortgage rates are falling. And household income is rising.
But there are lags and hiccups. As Cornish says, mortgage rate moves take six months to have an impact. The two cuts late in 2011 would be boosting housing now if the banks had not cut the shift short with out-of-cycle rate rises."