You are correct, HLS, of course. But I think that a $825K condo in Irvine being marketed to those making $135K (assuming this is their target market) is indicative of a bubble. I was also going along with the assumption that there are precious few bargains to be found in Orange County right now. Speculators are combing over every piece of property that gets listed, and people are throwing cash around as though it has no value. I would have more confidence in the market it we didn’t have so many speculators (with many coming from overseas) just looking for a place to park their money because they’re unable to get any kind of a yield in any “safe” investments.

Though it looks like today’s buyers are highly qualified, we don’t know where all this cash is coming from. There are too many stories of people using leverage in order to speculate in all of these markets — it’s in the form of non-traditional lending, so it’s not visible to those who just track mortgages. How much of this is laundered money? We’re seeing stories where people from Russia, China, and Mexico are stashing money in expensive real estate in large, gateway cities around the world.

It’s true that this can go on for many decades, in theory, but there are many signs that we’re smack in the middle of another credit-driven speculative bubble. It’s just a matter of how far it will go, and how long it will last. Admittedly, I’m almost always early in calling bubbles, but this is getting scary, IMHO.