I really like this quote (from an article in The Huffington Post). It so perfectly explains the market around here (in bold). Read the whole article it' pretty good.
Oddly enough I find myself back in the position of warning that the housing market may be heading to a terrible crash in the near-future. The bubble mentality has not changed at all and appears to be restarting in the very places where the bubbles were the worst. This is probably because people got used to unaffordable prices and think that a drop from unaffordable to just really, really expensive is a buying opportunity. Meanwhile government and the real estate industry are trying to "reignite" the market -- hoping that starting another bubble will put off the reckoning.
People still think that what we are going through a temporary "correction" and that real estate prices are going to "go back up," that houses are "cheap" now, that they should "snap them up" before they are "priced out." They still think real estate is the path to wealth, instead of somewhat of a burden that should only be undertaken under certain circumstances. Namely, when you plan to live there for a long, long time, and you'll pay less (including closing costs, taxes, insurance, maintenance, possible price depreciation, etc.) than rent.