Megan McCardle, at The Atlantic, quotes Karl Smith, an economics professor:
My baseline scenario for the U.S. included a rapid increase in the number of multifamily housing units and a general return to renting.
However, a few factors are combining to make me think that an alternate scenario, one in which the single-family housing bubble returns, is increasingly likely.
…
All of these factors combined mean that single-family home prices may stabilize in the near future. However, given the dynamics in the credit markets, stable prices do not seem like an equilibrium. Once prices stabilize the incentive to begin massively expanding credit to potential borrowers will be enormous and is likely to reignite.I would tend to think it’s unlikely that we will get the kind of price appreciation we saw the first time around. However, it is not impossible, and it’s certainly possible to get a strong uptick in construction.
Read the post to learn the factors that may re-inflate the housing bubble.