Second-most-undervalued market: Detroit
How much prices lag fundamentals:
The Motor City's housing sector remains in a major stall.
Trulia says Detroit home prices peaked at 42% above fair value in 2005, but have since reversed gears to hit 22.9% below market-fundamental levels today.
Kolko attributes the downturn to a basic "Rust Belt decline" that might make Motown a bad choice for investors focused on capital gains instead of rental income.
But just as with other Midwest cities on Trulia's list, the pullback makes Detroit housing a good bet for would-be owner/occupants. The site estimates locals who buy homes to live in for seven years will save 70% over what it'd cost to rent.