NEW YORK (CNNMoney.com) -- Despite a cool-off in home prices, more markets are overpriced than ever, according to a new survey.

Higher interest rates, especially for adjustable-rate mortgages (ARMs), helped push some housing markets into the overpriced category last quarter, according to Jeannine Cataldi, an economist with Global Insight, which conducted the analysis with National City.

Though rates have declined since the end of the second quarter, the 30-year fixed rate is still at 6.4 percent versus 5.8 percent a year ago. The difference for ARMs is even bigger.

The survey also takes into account differences in population density, relative income levels and historical valuations. Markets with premiums above 34 percent of "fair value" were deemed at risk for price corrections.

"Price growth will have to be stagnant while income and employment rises for housing valuations to fall," said Cataldi.

Despite a substantial cooling of real estate markets, home prices were still 10.6 percent higher nationwide than a year ago, according to the Office of Federal Housing Enterprise Oversight.

Seventy-nine of the 317 markets studied in the Global Insight/National City report were judged to be "extremely overvalued," up from 68 during the first quarter.

The pace of housing price increases has definitely slowed. More than two-thirds of the markets - 219 metro areas - saw a decline in the rate of price appreciation during the second quarter, according to the report.

"Significant slower appreciation, or outright declines, among overvalued markets are a signal that we are in the early stages of a correction," said Richard DeKaser, National City's chief economist.

DeKaser suspects that this correction will be gradual but lengthy, and the oldest bubble markets are the shakiest. "What we see happening is that markets early to the boom - Boston, California - are now showing adjustments," he said.

On the other hand, "Some of those late to the party such as North Carolina, are still showing heady appreciation."

Naples, Florida, remains the most overvalued market in the nation, deemed 101.5 percent above what National City considers fair value. Bend, Oregon, was second to Naples, 89.3 percent overvalued.

The five most undervalued markets were all in the state of Texas, with College Station, at a discount of 22.3 percent from fair value, leading all others. Dallas (21.2 percent) was second.

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