A cooling national housing market has reduced the number of cities with "overvalued" median home prices, according to a new report, but O'ahu still ranked in the top half of places with inflated prices considered extreme.

The June study, jointly published by economic research firm Global Insight and financial services company National City Corp., said O'ahu's median single-family home price in the first quarter was the 23rd highest of 54 U.S. housing markets with an "extreme" value — defined as being more than 34 percent above normal.

At $650,400, O'ahu's median home price was deemed overvalued by 45 percent, or nearly $300,000.

The report considered O'ahu homes 53 percent overvalued a year earlier, representing a peak. In the 2003 first quarter, when the median price was $358,200, O'ahu homes were considered just 1 percent above normal price.

Nationwide, Global Insight and National City reported that of 317 markets analyzed, 54 were overvalued by more than 34 percent in the first quarter, down from 62 in the same quarter last year.

Of the 317 markets, 196 were overvalued to some degree, while 121 were undervalued.

The most overvalued market was Bend, Ore., at 79 percent and a median home price of $324,200. The most undervalued market was Dallas, where the median home price of $133,800 was deemed 25 percent below normal.

Report authors said they determined statistically normal home values by considering home prices, interest rates, household incomes, population densities and historical premiums or discounts for each area.

Global Insight and National City suggested that home price resiliency is more precarious in markets with higher overvaluations, but did not draw any conclusions or forecasts about possibilities for price corrections.

Local economists Paul Brewbaker of Bank of Hawaii and Carl Bonham of the University of Hawai'i Economic Research Organization have said they don't believe O'ahu home prices will decline significantly, in large part because of expectations for continued job and population growth, rising personal income, flat interest rates, and a steady supply of buyers interested in second homes.

Last month, Brewbaker and Bonham predicted a 3 percent decline this year for O'ahu's median single-family home sale price to $611,000 from about $630,000 last year. They predicted that the drop would be followed by a slow rise back to $630,000 by 2009.

Moody's Economy.com forecasts that O'ahu's median home price will decline 0.6 percent this year, followed by small gains to $634,710 by 2009.

The Global Insight and National City report used a first quarter median home price of $650,400 derived from federal government data. The Honolulu Board of Realtors reported a first-quarter median home price of $620,000.

Reach Andrew Gomes at agomes@honoluluadvertiser.com.