Although the country as a whole is slightly undervalued according to MacroMarkets—with some cities such as Atlanta, Cleveland, Detroit, and Minneapolis substantially undervalued—two sections of the country are still overvalued: Southern California and the DC-to-Boston megalopolis.
The chief economist for MacroMarkets LLC is Robert Shiller.
Update: In the comments, Boston Bubble makes some good points:
I actually think your graph is better, given that you adjust for inflation before determining the trend whereas MacroMarkets only calculates a trend based on nominal growth. Inflation has varied dramatically over the years and that will necessarily distort any trend calculation based on nominal prices. I see that the MacroMarkets chart doesn't go back far enough to hit the Great Inflation of the 1960s - 1980s, so maybe it's not as big of a deal as it could have been, but that's another reason that I would trust your trend line more, because it goes back further.I think it makes much more sense to measure the trend after adjusting for inflation. Most of Robert Shiller's research on housing prices looks at prices adjusted for inflation. However, as far as I can tell, the MacroMarkets "Gap Gauge" does not.
Also, my trendline measures the trend from 1970-1999, while MacroMarkets uses a trend period of 1987-1999. Thus, they are only using a 13-year period to tell you what prices should have been over the following decade. I use a three-decade period to tell you what the prices should have been over the following decade.
To MacroMarkets' credit, they use a very slightly upward curving trendline, while the trendline I use is perfectly straight. I originally tried to use a slightly upward curving trendline, but the result Microsoft Excel gave me was nonsensical. I also have a graph (not online) that compares home prices to rents. The rent line looks very similar to my perfectly straight trendline.