The great turn of the century housing boom

Two Fed economists just released a very bullish report on housing. While I believe several of the conclusions they make are disconnected from reality, the paper can not be completely discounted. The conclusion of the report is:

Our main findings are as follows. First, it
appears that the housing boom has not been driven by
unusually loose monetary policy. This is not to say the
monetary policy has not been unusually loose, but that
to the extent it has been loose, this is not what has been
driving spending on housing. Second, the current levels
of spending on new housing are largely explained
by technology-driven wealth creation over the previous
decade. Third, changes in the demographic, income,
educational, and regional structure of the population
account for about one-half of the increase in homeownership.
That is, without any other developments, the
homeownership rate is likely to have gone up anyway,
but not by as much as it has done. The last finding is
that substitution away from rental housing made possible
by developments in the mortgage market, such
as subprime lending, could account for a significant
fraction of the increase in residential investment and
homeownership.

The conclusion that the housing boom has not been driven by loose monetary policy is supported with vague points. It is based on a model relating to different types of interest rate and economic shock (p 33-37), but does little to discuss what has actually historically happened with interest rates. It is odd that the first main point of this paper is a counter-argument to the hypothesis that loose policy has caused the run up in prices.
I disagree with this conclusion, but I disagree for different reasons then the typical(certainly not all) real estate expert who experienced the 1980's. The argument presented by the typical expert is that interest rates dropped to unbelievably low levels in 2002/2003 and this must be greatly contributing to housing appreciation. The fact is, the 80's were the exception, and 90's have been returning to historic norms. The 12% + mortgage rates of the 80's were a glitch that will not likely ever happen again. Because of this, housing has been appreciating, but the increased demand lower rates have caused is somewhat sustainable. The paper argues that the lower interest rates have not signifcantly increased demand... So I disagree with what the paper says, but agree with the conclusion that it makes. While the use of I/O, ARM, and <5% down loans will decline, they will not go away.

I highly doubt the wealth accumulation argument has legs. The premise is that because personal investment has increased, wealth has increased? Either the conclusion paragraph is not worded correctly or I am missing something. There would have to be a hell of a lot of pent up wealth to make the housing boom start immedately AFTER the 50% decline of the stock market in 2001. It has been argued that lots of personal investor money became scared of stocks in 00/01/02 and moved into housing, and I agree with this concept, though that argument is not the same as what the paper articulates.

The final argument about demographics is not supported enough. I have been a believer that California will not suffer as severe of a loss as placed such as Boston due to immense population/immigration increases (see http://www.housejockey.com/blog/2006/06/wake-up-boston-you-are-here.html), but this argument is not given in the paper. All that is really presented is that younger people are able to get into homes due to looser financing (p42), but the sustainability of this change is not addressed. It is hard for me to believe a paper of this caliber is really spending 3 pages saying "New types of loans have allowed more people to buy homes and the ownership rate is up... therefore housing wont' crash", but that seems to it. Why don't they explain why??
Again, with this argument, I agree that there has been some structural shifts and this financing sustainability idea has some merit, but the details presented in the paper do not support it and this paper certainly gives no indication as to the magnitude of this effect.