“What leads one to conclude that a declining dollar and rampant inflation would put downward pressure on real estate prices. I do not understand the logic of those who hold this view. Is there some sort of mass cognitive dissonance going on ?”

#1. There is too much inventory of unsold/foreclosed homes and it’s going to get a lot larger due to more ARM resets, divorces, job losses, etc. It’s going to take seven or eight years (at a minimum) to get unsold inventory numbers back in line.
#2. Housing in the bubble markets is severely overvalued when compared to the majority of homes in the rest of the country.
#3. Wages for the number of people that it would take to buy a home will not rise nearly enough in 10 years to afford anything more than a $300k median price. That $475k house that he just bought can be bought where I live in SC (in a major city) for around $175k. That’s how much houses are over-inflated in most of CA.