[quote=jdsuowner]If the price of this home was about $250K in 1996-1997 and normal(?) appreciation were to continue to 2011 what do you think the house would be worth today given there was no bubble? Was appreciation normally 4-7%?[/quote]
In the long run, home prices follow incomes or prices in general. Robert Shiller and a few others have done extensive studies of home price changes over long periods, in many locations. His conclusion was that home prices eventually follow general price levels (matching the general inflation measures).
I think it’s arguable that prices might follow household income, which grows more quickly than consumer prices over long periods. Since 1996, the CPI has increased 40%, and household incomes have increased more. My crude estimate was 70%.
Increases of 4-7% a year are unsustainable. That would require average annual increases in real household income of 1-4% annually over long periods, if we assume 3% consumer price inflation. That kind of growth in real income might happen in China, but not in the US.
