"Trees don't grow to the sky," said Delores Conway, director of the Casden Real Estate Economics Forecast at the University of Southern California's Lusk Center for Real Estate. "Twenty percent annual price increases are not sustainable. We are anticipating a soft landing. That doesn't mean prices won't go slightly negative, a 5 percent depreciation or thereabouts in the next couple of years."
But California, with a history of boom-or-bust economies, may be on a different course from other high-priced areas.
"In most parts of the country when we have seen unsustainable price gains, rather than price declines we have seen a period of very slow gains," said David Berson, chief economist of Fannie Mae, the federally chartered mortgage company. "In California when we have seen rapid price increases, they have tended to be followed by declines."
Brown worries about a possible "day of reckoning," but risk-takers such as Nicholson see few downsides to buying real estate. Sometimes even she is surprised by her optimism.
"The logical brain says it can only go so high and people will be out of money," Nicholson said. "They aren't making more land. As long as people are wanting to be in Southern California, as long as interest rates are favorable and loans are available, I think it is going to go up."