This is theory, empirically the data says otherwise. in 2007 there was a huge amount of evidence in plain sight that the housing market was a bubble, but the m

This is theory, empirically the data says otherwise. in 2007 there was a huge amount of evidence in plain sight that the housing market was a bubble, but the market didn't adjust to a rational level. See "The Big Short". That greatly understates the level of willful blindness, since it deals mainly with CDOs, not so much the house prices themselves.