It is indeed my blog. I agree, the biggest point of contention is whether houses were fairly priced in 2002. Almost all appreciation between 2000-2002 (especially in the top tier) can be explained by falling interest rates. Before that real estate was probably still recovering from the 1990 bust.

You could also say that houses weren’t fairly priced because interest rates were abnormally low, and that they are still abnormally low. Who knows, maybe they will shoot back up to 8%.

Finally, interest rates are only one part of the story. The other important factor is availability of down payments. A good chunk of buyers does not have cash for a 20% down payment. In 2002 you could get a second loan for 20%, but today your only option is a FHA loan that’s hard to get and you’re penalized by paying a slightly higher rate. OTOH, in 2002 lending standards weren’t as lax as they were at the peak.

This reasoning is very general and very approximate, it’s best to watch prices and see where they are going.