Report: Homes Are Less Overvalued after '06 Shakeout.

Waltham, MA -- Falling home prices are taking some of the froth out of the nation's hottest housing markets, according to an analysis by Global Insight here.

Nationally, the economic and financial forecasting firm says that 16% of the nation's homes are "overvalued" based on traditional ratios, down slightly from 17% in the third quarter. However, by dollar value, Global Insight said that 28% of the single-family asset value continues to be overpriced, down from 31% in the third quarter.

The company estimates that nationally, single-family housing prices rose 1.8% in the fourth quarter from the third. Year-over-year, prices were up 4.1%. The fourth quarter marked the return to higher appreciation in values for the first time since the second quarter of 2005, according to Global Insight. Up until the fourth quarter of 2006, the quarterly appreciation rate had been declining for a year-and-a-half.

But Jeannine Cataldi, senior economist and manager of Global Insight's real estate service, told MSN that the fourth-quarter numbers don't necessarily mean the bottom of the housing downturn has been reached.

"It's too small of a change to draw any conclusions at this point," she said.

The increases were not universal, naturally. Global Insight found that 72 housing markets, accounting for 22% of single-family real estate assets, saw price declines in the fourth quarter. Those declines were concentrated in California, Florida and the New York area.

According to the study, 21 of California's 26 metro areas suffered price declines in the fourth quarter. Ten of 18 markets in Florida saw prices fall. Naples, Fla., was the most overpriced market, coming in at 79.9% overvalued, according to the Global Insights study.