Critics of the idea we're in a housing bubble usually bring two main arguments to the table.

1. There's great intrinsic demand. Populations are increasing.
   
2. Mortgage payments only exceed rents in some areas, not all. Thus, any adjustments will be small, localized, and soaked up by aggregate demand.

I don't buy it.

First, housing prices are not a function of demand. (My father in law was born in this house, 86 years ago, and it's now in use by a distant cousin.)

Housing prices are a function of supply, specifically the supply of money made available to buy the commodity in question. This has been artificially inflated by tax gimmicks, by the subsidies of federally-backed mortgage buyers, by the lack of alternative investments, and by the over-use of dicey instruments like ARMs and interest-only loans.

Second, bubbles burst when just about everyone is invested in the market going up. The triggering event can seem positive on the surface, like the Time Warner purchase of AOL, but whatever the trigger is it sets a ceiling for prices that rests at or below current levels.

The last "triggering event" in housing was the 1973 Arab Oil Embargo. This raised inflation, thus raising interset rates, it caused unemployment, and it meant there wasn't a lot of money left over for housing, not as much as anticipated by prices.

There are many potential triggering events right now. Something as simple as a trade dispute with China could trigger higher interest rates. An upset in the U.S. budget, or a big bankruptcy, could provide the trigger.

Whatever the trigger happens to be the fact is that people are too-heavily invested in housing for their own good. If you are putting half your income into your mortgage payment, if you have an ARM you won't be able to afford if rates go up, if you have an interest-only loan or recently got your house with a 102% loan (a combination of first and second mortgages that also pays closing costs) you know you're stretched. Well, so are a lot of other people, and if something happens to cause lots of people to snap at once (raising foreclosure rates dramatically, creating more supply than the speculators can soak up) then you're not the only one who's going to fall.

So are the rest of us.