"Do you think the housing market bubble will pop? What do you think will lead to a pop? What do you think the market reaction will be if it does pop?"
Got to identify some terms first. The economic utility of personal use real estate is determined by the amount the individual who has the present right to use the real estate interest can devote to owning it--usually expressed as a percentage of income in the case of primary residential property.
Historically, bank economists thought individuals could devote 15% of their income to debt service on their residence--later expanded to 20% and then 25% to cover debt service, real estate taxes, and insurance. That percentage is obviously not a cast in concrete number--it is probably a little different for different people. But you can reach your own conclusion with a pencil and it probably won't be too far off the 20-23.5% range.
At this point, however, that number is drifting up into the 40% range at a time when interest rates are historically low. The reason we think we have a bubble is because people can't commit 40% of their income over time to owning their principal house; and we think long term rates are like to go up under circumstances where a lot of people got into this 40% box with adjustable rate mortages. At that point, either income has to go up; the individual has to stop eating; or there are defaults on mortages with bad consequences.
"Bubble" refers to the excess market value that results from the willingness to overpay and take the risk of being unable to pay carry costs and debt service--"popping" refers to the condition that results when lots of this stuff goes into default and buyers are no longer willing to overcommit to pay "market value".
Will it happen? I think so. Only way you don't have it pop is the dollar loses a lot of value as a result of fed action giving people the excess liquidity to make the monthly payments. Rick Akerman has an insightful article yesterday on MarketWise Black Box which is frankly one of the best current economic articles I have seen concluding that the people who get hurt if the fed eliminates purchasing power of the dollar have enormous political swat and for that reason, when it gets to a choice of who gets goared, the housing owner is the guy who loses.
What leads to the pop--historically, the received economic wisdom is that lots of houses are for sale and not selling; sellers take the houses off the market; then some sellers really have to move the thing at any price so put the house back up at a lower price and a new trend of market price is established. In the current economic environment, that is exacerbated by declines in income resulting from contraction in the economy--people can't make the monthly payments any more.