Karl Case and Robert Shiller developed an economic approach into calculating data on repeat sales of single family homes. Their team calculated the home price index back to 1890 and gave it a value of 100. It is updated quarterly. There are multiple Case-Shiller home price indices: a national home price index, a 20-city composite index, a 10-city composite index and twenty individual metro area indices. These indices are calculated monthly by Standard and Poor, with data points calculated for the time period of January 1987 through today.
Contrary to popular belief, there has been no continuous uptrend in home prices in the United States. Moreover, Robert Shiller illustrates how the pattern of changes in home prices bear no relation to changes in construction costs, interest rates or population movement. He further states there is a strong perception across the globe that home prices are continuously increasing and that this kind of sentiment may be fueling bubbles in real estate markets. Shiller says since homes are relatively infrequent purchases, people tend to remember the purchase price of a home for a long time and are surprised at the difference between then and now. Most of the differences in price can be explained by inflation. Since people consistently overestimate the appreciation of the value of their homes, showing an appreciation of 2% per year, Shiller notes the actual increase is 0.7%!