JWM points out that the bigger picture here has less to do with real estate and more to do with the Fed’s monetary policy.
After the NASDAQ bust in 2000, the Fed engaged in a frenzy of rate cuts, so designed to stave off recession and cushion the larger economy from the impact of the bust (which eliminated $4 trillion worth of wealth in a 2.5 year period).
The problem was that, similar to the Dollar Bust in 1997, which sent Asian countries into a tailspin, the money had to go somewhere. Add in the Chinese central banks buying dollar denominated assets to shore up the yuan, and you have a helluva lot of cheap money seeking assets to buy.
The real estate industry, the banking/mortgage industry and the Fed all have a vested interest in selling the notion of a “soft landing” for real estate. The Fed is terrified of hiking rates, to the extent that they are virtually ignoring rising costs of everything from fuel to food and claiming that inflation is “contained”. They will be forced to raise rates again and then it will get uglier still.
