You got to be kidding me...

Michael Kinsley expresses his opinion that the real estate market is in a bubble that's likely to pop any day now. Maybe. Well, who knows really?

It is obvious to me that today's real estate prices are a speculative bubble that is bound to burst. Of course, this has been obvious to me for about three decades and wrong almost all of that time.

Points for clever CYA. Of course, it's hard not to wonder what's going on when housing prices double in five years. Not so long ago, an increase like that took 15 or 20 years, and that was if the area near your house happened to get a lot of new development that made it popular.

The New York Times also must be talking to experts. "In Housing Sales, Frenzy is Giving Way to Balance," it says. And it reports from suburban Westchester County that "Housing Market Is Still Going Strong." In 2004 the median sales price rose from $564,000 to $645,000. "More and more families are seeing the residential real estate market as the best and safest place for their money," a real estate agent says.

Maybe he's onto something. I don't know about you, but I know a lot of people who are convinced they're smart in real estate investment. Their evidence? They've sold a couple houses in the last three years and made a killing. In the stock market, the short sellers start smiling when every Tom, Dick and Harry thinks they're Warren Buffett. On the other hand, people need a place to live, and the population is still rising, especially in the hottest housing markets. So the other possibility--which Kinsley doesn't get around to--is that supply still isn't meeting demand. How could that be, when there's obviously so much money chasing four walls and a roof? Consider:

• The size of the average household is going down, especially in the DC area where there are a lot of young singletons who can (or at least could, five years ago) afford a house. These people are buying real estate as an investment, and they don't follow the traditional path of getting married and having one or more children before moving to green acres.
• Most local jurisdictions have artificially limited supply by enforcing low minimum densities for the land area that they allow to be built. And most infill or downtown redevelopment is targeted to the extreme upper end of the market. Some recently announced condos inside the beltway are going for over $300,000 for a studio.

Ultimately, the result seems to be leapfrog development. If you can't find a house you can afford between Route 28 and Route 301, then you can either keep renting, or go out to west Virginia, western Maryland, or Pennsylvania to buy. With that kind of sprawl, it just might be that our version of midtown Manhattan now extends to the Beltway and beyond, and our Jersey City is now in Stafford County, or Westminster.