Was there ever a housing bubble?

Via Megan McCardle comes this Marginal Revolution post speculating that there was no housing bubble, because prices haven't come down dramatically. What if it wasn't a bubble, but a new equilibrium, and it won't go down from where it has climbed?

I want to believe him, because then I made the right choice buying a house a year and a half ago. And it's fair to say I would probably only be marginally better off in terms of how much house for the money I would get had I bought now, although I would have had an extra 18 months of savings to put towards the down payment. Most of the figures I read for housing prices in my area of Baltimore County is that they haven't really changed much - but the number of houses selling has dropped dramatically.

I feel like we are in a weird market - the kind that is neither buyer's or seller's market. People are afraid to buy houses, because they keep hearing that prices are going to go down (and possibly because tighter credit markets have made it harder for marginal borrowers to borrow). Sellers aren't willing to go down in price - and the fact that they aren't suggests that many of them don't really need to sell. I feel like it's a game of who is going to blink first, and whoever does will determine if prices go down (if sellers blink) or stay stable (if buyers blink). I think that there probably are bargains out there from sellers who really do need to sell, but I think it takes a lot of work - and a lot of offers - to find them.

Megan ponders why prices would have gone up, when there aren't good reasons for it like there were in the 40's and 50's. Some theories:

- more people staying single longer. The old model of home buying was that you lived with your parents until you got married, and then bought a house. Today, it's not uncommon for people - like myself- who are single to buy a house. That means even if the percentage of homeowners has only climbed slightly, each of those people own a house instead of half a house, if they were married.

- environmental restrictions. Yes, Megan figures that they have been around for a while, but I would argue that they have gotten worse and more restrictive recently. Plus, you figure that as time goes on, the amount of buildable land near places where people actually want to live is going to shrink, between restrictions and just plain physics.

- a change in the view of what a house is - from just a place to live to an investment. People in the comments in Megan's threads point out that tax laws have made it more favorable to cash out. Add in the mortgage interest deduction, which has always been there, but with smaller down payments has become larger and more attractive. It kind of feeds itself - houses get more expensive, so they have larger and longer mortgages, which means a bigger mortgage interest deduction, which makes it more attractive.