In two recent New York Times articles, both published in todays Contra Costa Times, two economics professors suggest many real estate markets aren't inflated afterall.

"Before you buy a house calculate its potential," and "Some New Math on Homes," by Damon Darlin of the New York Times.

"In a paper," Gary and Margaret Hwang Smith, "presented at the Brookings Institution this week, "Bubble, Bubble, Where's the Housing Bubble?" they said that even though prices had risen rapidly and some buyers unrealistically expected the trend to continue, "the bubble is not, in fact, a bubble in most of these areas."

"They argued that the value of a home is determined by the rent it could fetch. Calculate the future rents, subtract mortgage payments, taxes and other costs, factor in a good annual rate of return of 6 percent or more, and one should be looking at the proper price of a house or condo."

"The Smith formulas provide a way to determine if a buyer is overpaying."

"The calculation doesn't mean that as a seller you'd necessarily get that much. Supply and demand — and the Greater Fool Theory — will still determine the price. It means as a buyer you could go that high and still be happy with the decision in years to come."

Their bottom line was: "Buying a house at current market prices still appears to be an attractive long-term investment."

"At the risk of sounding like a real estate agent, Mr. Smith said there are two risks to consider when buying a house. One is that you buy and the price goes down. The other is that you don't buy and the price goes up. "The second is more scary," he said."

"Over Time, Owning a Home Really Pays Off." Realtor Magazine Online