As far as normal, usually if everything else is in balance, real estate prices should track increases in personal income.
As there have been so many extraordinary factors in the SD market in the past 20 years, there has been excessive volatility which has created both massive wealth destruction and creation.
So when I say normal, which SD will likely never be completely, its more like what would it take for the market to be driven entirely be fundamentals such as incomes/rental values and not speculation or a reaction to short term rates.
If speculation and low rates play a lesser role, then things are more normal.
Some markets go through long periods of stagnation after long periods of increases.
I spent years in Germany in the early 90s and recall how prices were increasing greatly there only to stop in the late 90s and not move for over a decade.
Prices in Berlin got really cheap at 5 times annual rent around 2004-05.
Now, they’ve almost doubled again. That was partly driven by capital flows out of Germany to other parts of the EU prior to the financial crisis.
The closest comparison I can think of in the US would be for investors to realize the cash on cash return (non appreciation) is so much higher in other parts of the US that the market in places like SD becomes more focused on the owner occupied rather than investor crowd.
