Despite rapid increases in home prices over the past year, prices are 4% undervalued in the fourth quarter — meaning the market is nowhere near another housing bubble, Trulia (TRLA) claims in a new report.

To put it into perspective, prices were as much as 39% overvalued in the first quarter of 2008 — at the height of the bubble — then dropped to being 15% undervalued in the fourth quarter of 2011, the real estate firm says.

“If prices nationally are 4% undervalued, why are so many people worried that a new bubble is forming,” questioned Trulia chief economist Jed Kolko.

He added, “Because prices have risen quickly over the past year, and even with the recent slowdown in the past few months, rising prices stoke bubble fear.”

In October, asking prices were up 11.7% year-over-year, which is roughly the same sharp increases seen in 2004 when the housing bubble was inflating.

Consequently, some market analysts believe that housing is in the depths of a bubble.

Given the fact that home prices are rising faster than real median household income as well as mortgage purchase applications, it signals the same factors experienced in the previous housing bubble, explained George Mason University finance professor Anthony Sanders.

“For the average American household, they are in a housing bubble,” he said. “For Chinese and other domestics and foreign investors, house prices are a bargain.”

http://www.housingwire.com/articles/27950-experts-mull-over-housing-bubble-expectations