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I recently read about a house sold in San Francisco for 19.1m. This is the first time it has been on the market since 1971, when it was sold for 131k, which is 991k "inflation adjusted". Either there's more inflation than the official statistics, or there is a systemic bubble that will lead to the first default of the entire US economy in 35-40 years.

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I highly doubt you can make these generalized assumptions from the sale of a single house.

Sure, but it can point you in a direction for inquiry.

Inflation in the Bay Area is around 20% YoY, based on price increases in the housing market.

This pretty much seems reasonable. Housing demand should probably depend mostly on the amount of wealth (maybe this should be income?) in the area. It seems possible that wealth in the valley is growing at 20%.

20% growth would mean the wealth in the area would double every 3.46 years.

This morning, it was announced that the US GDP grew at an annual rate of 2.9% last quarter, accompanied by the WSJ headline "US Economy Roars Back" [1].

20% growth is nowhere near "reasonable".

[1] http://www.wsj.com/articles/u-s-economy-grew-2-9-in-third-qu...

GDP is a measure of income, not wealth. It makes sense that wealth matters more for house prices than income, because it's a ~ one time purchase.

Inflation, not growth. You get less house for the same money.

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