on a national level, the case-shiller index should give you a good baseline for how a home's price should appreciate over the long term. homes should basically

on a national level, the case-shiller index should give you a good baseline for how a home's price should appreciate over the long term. homes should basically trend with inflation and, to a lesser extent, population growth (until space or other resources become a constraint hundreds of years from now). hwever, local market conditions dictate the volatility around that trend line. SF, for example, is space-constrained, demand-driven, and limited by zoning and other regulations, so house prices will be high relative to historical trends. appraisers use 3 methods to triangulate the current valuation of a house: (1) cost approach (how much it costs to buy the bare land and build on it), (2) sales comparison (finding recent sales for homes similar to the one you're valuing), and (3) income approach (typically the discounted cash flow of rental income). how these three approaches are combined to come to a final value is more art than science. basically, just like economic bubbles, you can only know for sure after-the-fact if something was overvalued. you don't have enough statistical data to know if something is currently overvalued rather than within the normal volatility of the asset price. (i used to manage the leading cost approach product)