Arpit Gupta writes:
Yet Milton Friedman’s arguments against bubbles remains powerful. Why would investors not respond to the addition of crazy money by betting against the bubble? Sure, most investors can’t technically bet against housing, but home owners could choose to rent, there are REITs out there, etc. Why couldn’t rational trading eliminate the mispricing induced by government spending, assuming that the government did intervene in unprecedented amounts before 2002?
I think Arpit is underestimating the difficulty of making negatives bets on housing here. First off, rental markets for single family homes are thin in many areas and the stock of housing there is systematically different than the stock of owner occupied housing. People also do not appear to be strictly indifferent between renting and owning, and transaction costs can be very large.
Even if some homeowners are able to bet against the market, investors not currently owning homes…
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Utopia, you are standing in it! 
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