Policymakers at the time, including myself, certainly appreciated that house prices might decline, although we disagreed about how much decline was likely; indeed, prices were already moving down when I took office in 2006.
6  8  Of course, one should not overlook the fact that, even in this benign case, there are risks. In a world where the real interest rate is below the growth rate of the economy a self-perpetuating asset price inflation dynamic can become a reality.