The housing market is not even close to forming a bubble, and recent developments have further diminished the likelihood that it will overheat anytime in the near future, Trulia said in releasing the results of its latest Bubble Watch report.

“Even though prices are less undervalued than one quarter ago, our chances of avoiding a bubble have gotten better. Price gains are slowing down, and asking prices dropped in July,” said Trulia Chief Economist Jed Kolko in an email. “Unlike in last decade’s bubble, prices today have started to cool before reaching dangerous heights.

National home prices in the third quarter of 2013 are 5 percent undervalued, compared with 7 percent undervalued in the second quarter of 2013 and 14 percent undervalued a year ago, Trulia reported.

How does that stack up against home values at the peak of the housing boom?

Prices then were 39 percent overvalued, according to Trulia.

Source: Trulia

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