The ever contrarian Alex Tabarrok at MR states that there is no bubble but prices are now at a higher equilibrium (or a higher plateau). He uses the chart above (the same chart that can be used to claim that there is a bubble) from Robert Shiller's Irrational Exuberance.
1. He notes that 2006 is similar to the post war run up in house prices that settled onto a permanently higher plateau.
2. He does not believe that prices can fall back down to 110.
However, he does not note that the post war run up to 110 is not really a new equilibrium level. Prior to the First World War, house prices have been around the 110 level before so the "new" equilibrium is really not so new.
It seems like we've heard this story before during the Internet "bubble" (or is it bubble without the quotes?). The story goes something like this - there is a increase in asset prices. Is it a bubble or not? The not a bubble camp comes up with a story -- increasing productivity, unique website visitors, eyeballs on page, demographics, interest rates -- but none of the stories show direct causality and remain speculative at best.