The Union Tribune in San Diego has this on predicting the housing bubble. "Although the Anderson Forecast has long been dour about the housing market, the most recent data suggest that the recent home-price boom is coming to an end. The Anderson Forecast has been predicting a slowdown in home prices since mid-2003. To many of its critics, such warnings sound a bit like the boy who cried wolf."

"'We've gotten lots of hate mail,' Thornberg said. 'The letters go something like this: 'Dear Mr. Thornberg, I listened to your prediction and sold my house a month ago, and now home prices are up 35 percent. My wife hates me. You've ruined my life.'"

"Thornberg added that in an irrational market, as real estate has been for the past few years, it's hard to make an accurate prediction of when a slowdown will occur. 'It's like trying to predict what a crazy man will say next,' he said. 'If you could do that, it would probably mean the man wasn't crazy.'"

And Rich Toscano takes on the issue. "A recent article on the endless housing bubble debate quoted California Association of Realtors economist Robert Kleinhenz's criticism of the UCLA Anderson Forecast: 'in 2002, 2003, 2004 and 2005, they said 'housing bubble, housing bubble, housing bubble, housing bubble.' So they got it wrong four years in a row.'"

"Kleinhenz's reference to past Anderson Forecast analyses reminds me very much of a typical reaction I have observed when talk turns to San Diego real estate. 'They've been talking about a housing bubble for years,' says the listener with a dismissive wave of the hand. And thus, like magic, are fears of a home price decline put to rest."

"This attitude makes little sense. For one thing, it's not exactly clear how what 'they' said in the past is pertinent to what's actually going on now. This is, or at least should be, a question of facts and evidence, not of who said what and when they said it."

"But more importantly, people who employ this reasoning are misunderstanding what one actually means when one claims that there is a bubble in the housing market."

"To say that there is a speculative bubble in a given asset class is to say that prices of that asset have been driven to unreasonable heights based on exaggerated expectations of further price gains. It is also to say that when those lofty expectations finally fade, prices will revert to more reasonable levels. But what happens between now and then is anyone's guess."

"If further price increases take place after a bubble is identified, it doesn't mean that there wasn't a bubble in the first place. It simply means that, as overpriced as the asset may have been in the past, it's even more overpriced now."

"Those who have asserted the existence of a San Diego housing bubble in the past few years may end up being wrong. But they may also end up being right. There's simply no way to be sure until this whole thing plays out."

"In the meantime, before dismissing the claims of seemingly premature housing bears, remember the Economist magazine's two rules of asset bubbles: that they always last longer than anyone expects; and that they always eventually burst."