Long run vs Short run

I should follow us my earlier post by noting that while expectations can be ideosyncratic in the short run, they are probably about right in the long run.

With that in mind, let me point out that in 2002 I thought that house prices in most cities (with the possible exceptions of Boston, San Diego and San Jose) were tied pretty well to fundamentals. So if you want to know long-run house prices in most places, look at values in 2002 and add around 3 percent per year. Alas, many places had double-digit increases per year between then and now...