The U.S. housing market is slightly undervalued and prices have fallen 9.9 percent from their 2007 peak, according to the fourth-quarter 2008 update of the U.S. housing analysis, House Prices in America from economic and financial analysis firm IHS Global Insight of Lexington.

Nationally, prices fell by 13 percent at an annualized rate and dropped in 92 percent of the nation’s metro areas – 302 of 330, the report said.

The rate of decline in the quarter was the greatest in the current housing cycle, the study said, and the rates of decline have exceeded the fastest appreciation rates of the bubble years of 2004 and 2005. Price contraction continues to be most severe in the Southwest and Southeast, areas of the country that had once been the most over-valued.

Statewide average home price declines for 2008 exceeded 20 percent in the four so-called "sand" states – Arizona, California, Florida and Nevada – and exceeded 10 percent in Maryland, Michigan, Georgia, and Virginia. Detroit, hit hard by the problems of the domestic auto industry, joined 40 sand state metros with declines for the year greater than 20 percent.

"We expect prices to decline further through 2009 as consumers remain wary of taking on housing debt in these uncertain economic conditions," said Jeannine Cataldi, senior economist and manager of IHS Global Insight’s Regional Real Estate Service. "Markets where the boom was greatest, and the fall the hardest, will be watched carefully for any signals that may indicate a trend towards stability and potential growth."