By ROBERT J. SHILLER
SINCE 1997, we have lived through the biggest real estate bubble in United States history — followed by the most calamitous decline in housing prices that the country has ever seen.
The Housing Haze
Fundamental factors like inflation and construction costs affect home prices, of course. But the radical shifts in housing prices in recent years were caused mainly by investor-induced speculation.
Anyone contemplating the purchase of a home wants an idea of where prices will be when it is eventually time to sell, perhaps many years later. For that kind of long-term forecasting, we need to understand the reasons for the recent, violent price cycle, and whether it is likely to repeat itself.