Since 1989, one could say that the market indices shot up by a factor of 5 or more, but a current check of my former LA neighborhood reveals home prices near or below their '89 values. What bubble? Currently, my locale in the infamous Bay Area reveals the price of my condo as about twice the selling price when first built in 1991. Again, given the acute shortage of affordable homes in this area and the lack of building, this is not even a bubble, by a longshot.
Now I DO know of homes is certain, specific communities that shot up by a factor of 2 or more in a few years time. Not to mention home prices in outlying communities that are far from work centers and not that desireable to live, have doubled. These areas are the prime dangers zones.
This would be true if we were not all using the same source of liquidity: The GSE money pumps.Prior to FDR's creation of the GSEs, homes used to depreciate like cars. The only way for them to appreciate is for 1. supply to outstrip demand, or 2. for the home to be constantly repaired and improved or 3. for banks to distort the capital markets( in this case by pumping money from the bond market into homes thereby evading the multiplier restrictions placed on banks. 40 to 1 debt to equity these days...There is now more GSE debt than publicly held treasury debt )
I think its #1 due to over-regulation and the erosion of American's traditional property rights and a good deal of #3. It aint #2 as the quality of construction in bubble zones is a joke.