Are today’s homes undervalued?

After dropping for three years, home prices appear to be stabilizing. The median national home price today is about $169,000, down almost 14 percent from a year ago and an estimated 30 percent from its peak. It’s safe to say we’ve reached the point where prices are justified by the fundamentals of the economy and may even represent an undervaluation.
Foreclosures and short sales comprise about 50% of transactions today, creating market distortions in otherwise stale neighborhoods. In determining valuations, we’re capturing only transaction prices, and the prices of those properties might be 20 % below values of other homes which have real equity in them. It is possible that widely cited projections that a third or more of home owners are underwater might be off the mark! I think credit markets are working against creditworthy households because lenders are shying away from refinancing mortgages. By not making the loans, lenders are really exacerbating the situation. What’s clear, is that the challenge today is getting credit. And, homes are undervalued.