I've read extensively on this issue and lean more to the "bubble" camp, but I'm not here to make that argument. The selected quoting of statistics can and will be used to to make whatever argument one wants to make. Endlessly. Real estate as an investment or as shelter either makes sense or it doesn't. Long term, it has generally worked out. Short term, it may well rip out some folks' internal organs.
IMO folks need to de-focus on the macro and do what's right for them and them only. The last round of speculators, who made up roughly 25% of the past few years runup, will be trashed, and that is entirely normal. It's unfortunate that those homeowner/occupants who bought in at "it can only go higher" prices will likely see paltry returns for a while. But they buying housing, not speculative investments. They may be disappointed in home valuations in their Sunday paper, but disappointment is part of life. It's normal to lose one's job and get crunched on one's housing costs. It's normal to get a new job and buy a bigger house. These things ebb and flow back and forth.
My view is that housing will soften primarily due to rising rates and the exit of the specs. Still, the only thing that really matters to occupant type homeowners is their monthly nut, relative to renting and relative to their desire to reproduce and maintain a more supportive family situation. If they can't afford that, they will get kicked out. Nothing bubbly about that, in good times or bad.
I tend to agree with you, but I do find the "NEW" lending practices troubling. Forty year notes and all.
One other thing. When the escalation in home values slows ... where does one go for spaneding cash? People have been using their homes as ATM machines. What impact will this have on the overall economy?