Five years ago today we mentioned that the New York Times had asked economists to “share the data they use to figure out how much houses in regional markets are overvalued, a calculation that approximates where the bottom may be.”
The economists estimated that Chicago home prices were overvalued by between 11 and 18 percent in March of 2008, a time when the Case-Shiller Index for Chicago was at 150.43. An 18 percent drop would have seen the Case-Shiller bottom at 123.35. The Index fell to 103.98 in April of last year, nearly 31% below the March 2008 level.
At the time I opted to side with a senior economist at the Federal Reserve Bank of Boston, who said: “I try to avoid house price forecasting. Let me just say this, as an economist, that asset pricing is something we’re exceptionally bad at.”