An article in today’s New York Times outlines the wonderfully varied metrics that economists are using to predict home prices in metropolitan areas. Chicago metro-area homes are overvalued by 11% by one measure, and by 15 to 18% by three others. Note that these are metro-area metrics and tell you nothing about the price of an individual home or prices in a particular neighborhood.
My take? I’m going with the Times’ quote from Paul S. Willen, senior economist at the Federal Reserve Bank of Boston: “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.”