I think we are missing the one critical part of the equation that is making real estate go nuts: human nature. I think it is correct to point out factors such as sustained low interest rates, influxes from foreign cash buyers, reduction is supply from C19 (and previously, from delayed responses from the 2008 - 2011 real estate recession).
The major factor why we are seeing (economically) bizarre behavior by buyers is much the same as it was in previous real estate booms. In the land boom of the late 8-0's iot was peop;e buying land as a hedge for inflation. In 2008, it was a "can't lose in real estate" mindset, fueled by "lending innovations" such as NINJA loans.
Today, the emotion is fed by a generation of millenials who have grown up in the "everybody gets a trophy" era. They have never gotten their pee-pee whacked for being stupid. There is no fear of failure, mommy and daddy will bail the out if it goes sideways. Add to that a Zeitgeist of FOMO, fear of missing out, fueled by foreign and corporate cash buyers. People think they have no choice but to join the bidding war and throw insane amounts or money at sellers to "be able to get a house". It's a form of mass-hysteria. Some markets, like California, are quite cyclical, and when things are cooling down (like they are right now), all it takes is one little corner of the market to start creeping down, and the whole thing will lock up, as the usual scenario for the housing market is not for prices to fall as much as for buyers to disappear. When a market stagnates like that, it's not unusual for prices to be flat for close to a decade, until inflation has sapped away the excess from the market.
We called it "stagflation" in the '70's The emotion of the peoiple changed to one of gloom and despair, and it took Ronald Reagan to pull the nation out of it along with draconian interest rate policies. but the biggest change was people believing they could again. So I look more towards sentiment than fundamentals right now, because the fundamentals do not explain the market.
