It took me a long time to really understand that market psychology is one of the fundamentals in the RE markets. It’s a mistake to focus on the numbers to the exclusion of human emotion. I’ve made that mistake in the past and I’d like to think I’ve learned my lesson from it.
I would argue that the expectation of price increases existed before the easy credit. It migrated from the stock market into the RE market, and now the RE is over it’s migrating over to commodities and stocks again. It’s a demand to get rich quick in search of an asset class to ride and a mechanism to ride it.
In my opinion, the easy credit acted like oxygen to a fire, enabling what would otherwise have been a flare-up to rage out of control. That’s why (I think) the availability of the same credit terms everywhere in the nation has had varying effects.
