Rustico –
The traditional rates of appreciation as support are more a proxy for inflation and/or wage growth than anything else, especially at 4%. The “normal” rate of appreciation line of thinking was spurred by the original post.

Regardless of if you use that line of thinking, macro-economic affordability metrics, or micro-economic affordability metrics (#2 and #3) I think the answers are all quite similar.
Personally I like the #2 and #3 scenarios, since this is how (reasonable) potential buyers think.

In the end the market doesn’t care about justice in pricing, or historical precedent, it will be affordability that determines the market bottom.