After two years of falling prices, U.S. housing is undervalued in most markets, according to a new study.

Recent data showing a miniscule 0.1 percent drop in prices in the fourth quarter "indicates that the housing market is still working towards -- and is close to achieving--stabilization," concludes the House Prices in America report prepared by IHS Global Insight and PNC Financial Services Group.

None of the major U.S. metro markets were rated as significantly overvalued by the study. In contrast, 137 of 330 metro areas were listed as overvalued during the peak bubble years.

fhfa-03212010-chart-2.jpg While these types of reports are often easily dismissed, it's worth noting that the IHS study correctly spotted vast over-valuations in 2005 and 2006, offering signals that the bubble was about to burst.

In 2005 the study identified 52 metro markets as extremely over-valued, primarily in California and Florida. For example, Miami was listed as 49.4 percent overvalued and prices subsequently fell 35.8 percent. Thirty-one metro areas have posted declines of greater than 40 percent from their peaks, the study found.

Although overall the U.S. is now seen as undervalued, the study still found some markets that are rated as over-valued. For example, Honolulu is still overvalued by 13.6 percent and Spokane, Washington, is 13.1 percent overvalued, the study found.


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