Housing bubble floating ever upward?

Global Insight rated housing for many NW cities. The results could be scary. I gave Global Insight a bad time for its predictions on oil prices and inflation, but here they rate housing in line with Dean Baker's analysis at the Center for Economic and Policy Research. (On the same scale, that is. I don't know what the methodology is.) See Baker's "The Menace of an Unchecked Housing Bubble."

Notice the closer you get to California, the more overpriced housing is. If you look at the full list, California is all above 60%. Also, notice the further east (or actually toward the Midwest), the less overpriced housing becomes. Many cities in the Great Plains and Midwest have housing that is actually underpriced.

When the assessor comes around, he is judging market value based on comparable sales. That is the price in the newspaper. That is the bubble price. But beware. If housing returns to a level predicted by long-term trends, this is the amount your equity could drop.

That is not only bad news for you, since you're on the hook for the difference between your loan value and the equity (and the bank can ask for that difference in cash), but it's bad news for the state's economy, since residential construction has been the engine of growth over the past five years.