This week’s Voice of San Diego article discusses what can and cannot be realistically forecast about the housing market at the current time. The premise is that while fundamental factors such as incomes, population, and housing supply can be forecast, the population’s tendency towards manic speculation cannot. And right now, the housing market is driven a lot more by the latter than the former, rendering (for instance) one-year forecasts kind of useless.
Looking further out, we can make a pretty confident prediction that the pattern displayed by this chart will continue, and that that ratio of home prices to incomes will end up much lower:
…but even then we can really only guess as to how much of that adjustment will be caused by home prices declining vs. incomes rising (a task made much more difficult by the fact that the political sphere can become involved in either factor). All in all, forecasting nominal home prices entails making a lot of assumptions.