It is important to remember that while there has been a great run-up in housing prices in recent years, there have been large parts of the country that saw little of the boom.
Part of the reason for this is because there have always been two housing markets, one in major (usually coastal) cities where supply is constrained (relatively inelastic, like Manhattan). In this case housing demand (ultimately disposable income) drives housing prices.
In other parts of the country, land is freely available for development and increasing prices only lead to increased housing construction (relatively elastic supply). Over the long term, housing prices closely track the cost of increasing supply - the cost of construction (and factors like lumber prices or the wages of Joe the Plumber).
ON the Bubble Overall:
In terms of the bubble overall, easy access to credit due to lower quality lending, a permissive interest rate environment and an influx of foreign buyers during a period of dollar weakness, all combined to push many cities above historic norms. These forces were probably most felt in major coastal cities (though limited increases in supply during this period may limit the eventual fall).
However, these variables can only lead to one-off increases in prices and not continually higher prices (e.g. interest rates can at best eventually fall to zero, exchange rates shift and foreign investors also eventually find prices to high for their incomes). If prices continually rise above income, eventually a point is reached where virtually all of the typical household's income goes to housing and no new buyers are available.
Most curious to note are cases like Miami and Los Vegas that saw large price increases in that they are not supply constrained. Drive north along the coast from Miami or survey the area from Google maps and one sees large tracts of land still available for development, even on the water. Similarly, a shorter commute can support relatively higher prices in the more central neighborhoods of Los Vegas, but are hard to sustain if prices are much lower just a short drive away to cheaper, new construction. In both cities, as prices increased dramatically in recent years, so did construction and many of those units are just now coming onto the markets (supply increasing just as demand drops = collapsing prices).
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