you know, i still think this whole argument is missing the major underlying factor, which is demographics.

put all this stuff about lending and bubbles aside for a moment, and you're left with a boomer generation that was told to invest in housing to fuel their retirement. now, contrast that with stagnant wages since the 1970s. if you have housing rising faster than inflation and wages rising slower than inflation it's eventually going to crash when the boomers go to cash in their investment, and there's nothing that can be really done to stop that. this is the consequence of building a society on spiralling debt: in the end, the investment turns out to be worthless. what's going to burst is the boomers' retirement plans.

it gets a little worse when you consider the fact that they're all going to sell at the same time. they're still a demographic bubble. so, if they all decide to retire at the same time and all put their houses up at the same time they're going to crash the price through over-supply.

now, the banks could react to this by reducing supply, but it creates a headache in itself.

at the end of it, what you're left with is the understanding that the bubble is the collective entitlement of the boomer generation, and that it will disappear along with them - likely in the benefit of their children and grandchildren, who will see prices adjust downwards to their earning potential.

http://business.financialpost.com/2014/04/17/canada-housing-correction-could-trigger-another-recession-bmo-report-says/

even if the banks go full asshole and leave the houses abandoned (and i can't see that happening here), in the end they're going to have to sell for a song - provided the buyers are willing to repair them.

this idea of infinitely building houses into never ending suburbia doesn't take into account the fact that people die and the population growth rate is pretty low here....

i mean, for the last 20-30 years, you had a pretty stable situation where boomers could sell houses to each other based on their mutual levels of inflated equity. the whole thing just kept spiralling out, and the banks just kept making money. it's all on paper, though. the younger generation simply doesn't have 20 years of inflated equity to cash in. they're not going to buy a bungalow for $600,000 on a $50,000/yr salary - which, to us, is a quarter of what it was to them. it's an impossibility. the price of that bungalow has to fall to half or a third of that - to where wages are, which is a tremendous disconnect. and, that leaves betty boomer with an empty hat.

there's no way around it. the kids aren't going to generate that kind of equity. they can't inherit it unless their parents sell - circular logic, an impossibility.  they're not going to see 500% pay increases. the market just simply has to fall.