Some economists argue that there were good reasons for housing price to rise. Explain their argument

What will be an ideal response?

First, the real interest rate was decreasing, increasing the present value of rents. Second, the nominal interest rate was also decreasing, and this mattered because nominal interest payments are tax deductible. Third, the mortgage market was changing: More people was able to borrow and buy a house; people who borrowed were able to borrow a larger proportion of the value of the house. Both of these factors led to an increase in demand, and thus an increase in house prices.