A realtor quoted in the New York Times: "South Florida," he said, "is working off of a totally new economic model than any of us have ever experienced in the past." Shades of the "new economic model" that jusified a Cisco P/E of 180 at the height of the NASDAQ bubble.
Around these parts (D.C. area), I've heard all sorts of explanations as to why stratospheric local housing prices (despite stagnant rents) are justified. None of them take into account the fact that prices have risen as much or more in South Florida, New York, Boston, L.A., the Bay Area, etc., not to mention Sydney, London, Brussels, Rome, etc. Clearly, it's a liquidity-driven bubble, resulting from an easy money policy instituted by world central banks. The post-Russian bond market default of 1998 caused a monetary easing, which inflated prices of securities (a form of inflation); before that liquidity bubble could be completely undone, 9/11 caused a new easing, with the inflation going into real estate instead of securities. (If rising home prices were really housing demand-driven, as real estate bulls insist, rents would be rising along with housing prices.)
And I don't know how many times I've heard that "prices may stagnate, but you won't lose money." In 1988, a man drove up to my parents' house in Queens, and offered my father 500K, cash, for the house. Four years later, it would have been difficult to get $325K [still more than before the great housing boom of the '80s, but cold comfort if you got in at the top] for that house, and it wasn't worth 500K again until 2001.
UPDATE: For what it's worth, my father intuited that this offer suggested a market top, but told me at the time, "I'm not ready to retire and move to Florida, and any other house I buy in the area will also have an inflated price, so I'll just stay here." He, did, on the other hand, acting as president of our local synagogue, sell off the synagogue's parking lot to a real estate developer who built $650K houses. That developer was soon bankrupt, and the synagogue, with a much-dwindled membership, is now living off the money it received from that transaction. I'll be bold enough to predict that we are at or near (within a few months) of a market top now. And if you don't believe me, my dad sold off his REITs this week!