You may be right. Unless there is a complete meltdown in our economy, we may indeed be heading toward a "normal market". The problem is that the past 5 years were so absurdly abnormal on the "good" side that there is a lot of room to come down before prices reflect that we are in a "normal market".

But keep in mind that you don't need skyrocketing interest rates to cause a "bad" RE market. The Japanese RE market dropped 50% from its peak in 1991 even though interest rates remained extremely low the entire time. Why? Because RE in Japan was overvalued -- and even low interest rates couldn't save the day.