this can not end well
Boy, Chooky's title has hit it right on the head. Anytime you have a situation where EVERYONE thinks they can get rich, you're screwed. I wonder what the most effective way for me to short the market would be?
My favorite quote is one that Chooky highlights: "LA homeowners expect their home values to grow 22% every year for a decade." Just FYI, the math on that says that if you bought a house in 2005 for $200,000, your house would have to be worth $1.2 M in 2015. That would be absolutely absurd.
My thoughts are that, though I don't think housing can maintain the sustained growth rates, the pull of being close to the center of the city and/or where you work is so strong that you won't quite see a burst bubble. Likely, you'll just reach a point where the total number of owners goes down (with each owner owning more) and more renters come into the picture. A depression in prices would mean that people see a reduction in values of the homes... I don't think that will happen. The best you could get is some retreating off the peaks, but that's it.