I think it can be explained by:

lack of compound growth. If we assume a fixed annual 7% appreciation, mathematical compount growth will allow it to double in 10 years. However, if it stops behaving linearly, then it can no longer compound, the assumption falls apart. Real estate market is non-linear. It may continue to rise for 5 years with 15-20% for each of these years. I still remember in 2004, my community jumped > 100K in a year. In 5 years, the market could accomplish the task that it is supposed to accomplish in 10 years. Yes, you are very right, we can only think in terms of equivalent annual average appreciation rate, rather than real appreciation rate.

Basically, it’s a waste of time to assume average annual rate. It never happened that way. Rather we need to focus on the doubling potential for 10 - 12 years approximately. 7% annual rate is simply a false comfort. Often we hold real estate for a long time, only for the purpose of catching that 3-4 years of hyper jump. It’s no exaggerating to say that we hold for 10 years, to cover the opportunity of a 3-4 years spike. A lot of investors ran out of patience, especially in 1989 to 1997 cycle. They bought in 1989, ran out of patience in 1997, sold that year and missed the ensuing 97 to 2005 run.

Never believing in a false 7% annual rate. Usually it only serves to give you a false comfort, that’s it.