Maybe not exactly a bubble, but:
But can these prices hold? My own guess ˆ and I am generally wrong, which is something to take into account in assessing my advice ˆ is that they can‚t. At some point the shock of the stock market collapse and the Wall Street lay-offs and the looming $6 billion New York City deficit have got to begin to reverse the cycle. Not to mention the possibility of higher interest rates if things like a falling dollar were to rekindle a bit of inflation. (A falling dollar makes the things we import more expensive.)
Because that‚s just it: real estate prices are cyclical. I agree that „bubble‰ is too strong a term for what‚s going on in American real estate (and I‚m speaking here mainly of residential real estate, where I at least have a tiny bit of anecdotal experience). I don‚t see home prices dropping 95% the way hundreds of NASDAQ tech stock prices have. But „peak of the cycle‰ might not be too strong.