I presented my hypothesis to my economist friend, and here was his take;
I'm a bit skeptical of the housing bubble. Here is another chart, national income (left axis) and housing prices (right axis):
Note that the spike in home prices and the spike in income happen at the same time. Also note that this isn't perfect since it is aggregate and the reality is that a large portion of people that were likely already wealthy/homeowners saw their incomes increase and expenses decrease during the pandemic. Lots of money to spend on a nice new house in the suburbs (or a vacation home!). We've also seen a lot of people moving from high priced areas like Seattle/San Francisco to less expensive areas like Spokane as they can now work from home. Or perhaps they want to retire somewhere with a lower cost of living.
House price growth seems to be driven by a few factors during the pandemic: significant growth in incomes, housing production (already low) slowing down during the pandemic, and people moved out of urban cores (all of the amenities of living in urban areas went away when you couldn't go to restaurants/bars/shows/etc.). All "fundamental" reasons.
I also think that a lot of developers have priced in the interest rate hikes into their models. So development might be lower than previously anticipated, but should continue to grow. We are still significantly underbuilt in a number of areas, vacancy rates are low, and people are able to make payments (delinquencies haven't really increased).
As an aside I got asked to do a report on if we were in a bubble in 2015/2016 and came of with this (inflation adjusted) cool graph:
I haven't updated it in years, but suspect it would show we are in the ballpark of being properly valued due to the spike in incomes. But for a counterpoint, this is interesting:
https://www.dallasfed.org/research/e...m_campaign=dfe