I just read an article by Yale Economics Professor Robert J. Schiller about why we had such a large increase in home prices since 2000.  Basically, he believes it was a self-fulfilling prophecy.  People believed that the prices will go up and so they did.  It was a classic bubble like the bubble in tulip bulbs in Holland centuries ago.

Of course, eventually a bubble like that bursts and things come down to a more normal price.  He says that the higher prices are not based on any underlying value, other than the percieved value that someone else may give for the property.  As long as someone else will pay more than the seller's purchase price, the prices continue to increase.

Of course there is an underlying value in any house, that is the amount that it would cost to purchase the labor, land and materials to build the house.  The builders profit is a fluctuating amount that may or may not be included in this value.

You can download the article here. 

After reading the  article, I did a little research on the Wasilla Market.  You can take a look at our price increase from 2000-2007 on my website here.

It appears that we have had an average price increase of about 7 1/2 percent over the last seven years.

What has been the average price increase in your area?