Housing market This can't go on: house prices must drop or wages must rise. Which seems more likely?

Following my post about the economy-http://letstryeurope.blogspot.com/p/time-for-revolution.html

From today's Observer- 10.10.10
http://www.guardian.co.uk/business/2010/oct/10/halifax-grantham-housing-bubble

One veteran fund manager warns that he has only ever seen two bubbles that have failed to deflate. How much longer can the UK property market remain one of them?

House prices fell 3.6% in September. Photograph: Alamy

Jeremy Grantham is the veteran fund manager who founded the US investment firm GMO. He is also a specialist in defining and identifying bubbles, which he rightly regards a crucial task in the investment game. He claims to have identified 34 of them over the years and says only two have failed to burst or deflate. One is today's UK housing market.

Grantham's findings are worth exploring in light of last week's news from the housing market. The Halifax reported that average house prices fell by more than £6,000 in September to £162,096, a drop of 3.6% from August and the biggest monthly fall on record.

Despite such dramatic figures, many economists were sanguine. They said it was far too early to declare that house prices, having recovered about half their post-banking-crisis fall of 15%, had embarked on another lurch downwards. The Halifax's Martin Ellis pointed to the three-month rolling average, which he regards as a better guide to the underlying trend. This showed a decline of 0.9%, a far cry from the quarterly falls of 5% that were seen in the autumn of 2008.......cont(follow link above)