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What's the right price for a home?

Florida old-timers often pine for the 1960s, when they could finance a two-bedroom box for $6,999. They stared aghast at the price runup through 2006, when a typical Tampa Bay home vaulted in value to $240,000.

Well, here's one way to measure the appropriate price for a Sunshine State spread. Let's use the rate of inflation, and then measure how much Florida homes have appreciated beyond that inflation rate, historically.

Back in 1970, the typical Florida home cost about $15,000. Through inflation alone, that home would have cost about $32,000 by 1980. But, in fact, a typical Florida home sold for about $45,000 by 1980.

That means home prices in the 1970s increased about 41 percent above the rate of the inflation.

Let's move to the period from 1980 to 1990. Based on inflation, Florida homes should have appreciated to $51,000 by 1990. The real number was $77,000. So during the 1980s, home prices rose 51 percent above inflation.

It was much the same story during the 1990s. If home prices followed inflation, your typical house would have cost $66,500 at the end of the decade. But in 2000, Florida homes were valued at $105,500. The decade produced home appreciation 59 percent above inflation.

It was in 2000 that home prices started to go orbital, reaching their apogee in the summer of 2006. They've since fallen 40 percent, to about $144,000. But is this number an accurate reflection of historical home price patterns in Florida?

Alas, no.

Let's go back to that $15,000 home from 1970. Inflation by itself would have pushed the price of the house up to about $87,000 by this year. But as we noted above, Florida's median price stands at $144,000. That means our current beaten-down price still outpaces inflation by 66 percent.

You'll recall that from 1970 to 2000, each decade produced appreciation of between 41 percent and 59 percent above inflation. To reproduce the historical trend, Florida's median home price would have to fall $10,000 to $15,000 more.

Makes sense to me. But real estate forecasting the past five years has meant ignoring much of the conventional wisdom.

James Thorner can be reached at (813) 226-3313.