Housing fell a little bit off the 2005 highs and the result was very nearly a total collapse of the financial system. The Fed and the government did everything they could to backstop housing (at the expense of housing affordability and banking system reform) and it's now permanently unaffordable.

More accurately we could say that housing will never be allowed to fall. The entire economy will be sacrificed at the altar of home values. Homeowners vote more than non-homeowners, and so much investment capital is tied up in housing that a major fall in home values would destroy the financial system.

Demand has greatly outstripped supply in the bay area. Even with a moderate reduction in demand prices may still rise.

http://blog.altosresearch.com/how-sustainable-are-the-exorbi...