In any event, I take some comfort from the continuing disagreement among close students of the market about whether houses are overvalued, and, given the widespread press coverage of this issue, from my expectation that people should now be aware of the risks in the real estate market. Finally, there is the exchange rate.
The inability of anyone to predict movement in the dollar accurately and consistently has been evident. Presumably, the dollar’s value is based partly on market expectations about future interest rates, trade flows, and portfolio preferences, among other things. There is no particular reason to think that these expectations are substantially distorted.