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?
All I can say is that the death of the American consumer has been wrongly forecast for a long time. I agree that compared to traditional lending practices, we have moved into a fantasy world. But the producers of this fantasy world have 500000 times the resources available to keep the party going as the other camp.
The single thing that is a serious counter to all the forces that would rationally pop the outrageous runup in RE prices is that on the other side of this trade is/are the most powerful monetary forces on earth: Central banks, led by our friends at the Fed. This month, actually yesterday, the Fed ceased the release of M-3 information. The same folks who think the RE bulbble is in serious jeopardy point this out. The lack of this info will mask the level and velocity of of money pumped into the economy, primarily into the stock and bond markets, and primarily for the benfit of Goldman Sachs. Witness their blowout earnings announced a few days ago.
The rational part of my brain says the RE runup is a total charade and vulnerable to decline, perhaps serious decline. But I have to also consider that the growth in the money supply has been staggering under latter-day G-span and how helicopter Ben. So unless one ignores the forces working to prevent the pop, the future of RE is not entirely clear cut, as I see it. RE bears are taking on the single most powerful force on earth.