A home bought for cash 28 years ago for $86K that sold for $1M on Friday would have returned an annualized 9.16%.
An identical amount invested in 1977 (6/17/77 at 99.97) in the S&P 500 index and sold on Friday (6/17/05 at 1216.96) would have returned an annualized 9.34%.
This doesn't take into account the impact of interest paid (or tax deduction thereof) on a loan or the massive impact of dividends paid and reinvested in the stock holding. Realtors cut isn't in there either.
9.16% is nothing to scoff at but isn't an astronomical number. Real estate returns often look more impressive because we start with and end with a large absolute dollar amount.
That being said, a situation like that doesn't look much like a bubble to me.
It also doesn't account for the imputed tax free rent value of living in one's home. That is rather more valuable than the dividends paid.
But you haven't included the cost of renting a residence for 28 years. That's a big part of the return.