Bruce asks what bubble:
It is worth noting that housing prices aren’t just rising here, they are rising worldwide. According to the Economist magazine, housing prices rose 65 percent in the United States between 1997 and 2004, but they rose 112 percent in Australia, 139 percent in Britain, 149 percent in Spain, 187 percent in Ireland and 227 percent in South Africa. The rise in housing prices, here and elsewhere, is not surprising, given the decline in interest rates. Housing prices are, to a certain extent, like bond prices. When interest rates fall, bond prices rise. But, when interest rates rise, bond prices fall. Therefore, the critical question is what will happen when interest rates inevitably rise from their current, historically low levels? Economist Arnold Kling points out that much depends on whether market rates rise because of inflationary expectations or because real rates are rising because of an increased demand for credit. If it is the former, then housing prices can continue to rise even as interest rates rise. But if real rates — the market rate less the inflation rate — rise sharply, then all asset prices are likely to fall.
That sounds about right to me. Has Bruce been reading this?