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Web site has new algorithms to determine if a home is priced right

UShousingmeltdown.org has a home price reality check which tracks the relationship of home prices to income.
New Housing Value Calculator by Zipcode
We all want insight into where home prices are headed.

The site's founders argue that the income-to-home-price ratio is a sound indicator of whether homes are priced right.

Home prices have historically been two to four times a homeowner's yearly income. However, during the height of subprime insanity, that relationship stretched to where homes were selling for nearly 12 times a buyer's salary.

They also offer a feature that predicts the local market's likelihood to return to the historic salary-home price levels in four years.
The site looks at 3 fundamentals:

Fundamental #1 House price to income level
House prices have always had a relationship to local income levels. Incomes and ability to make mortgage payments are the main factor to limit how high prices can rise before they reach buyer resistance because potential buyers can no longer qualify. Responsible lenders use what they call a front-end qualifying ratio of a maximum of 28% of a buyer’s gross income to be available to make mortgage payments. So if potential buyers in your neighborhood earn $80,000 per year, the most a responsible lender would allow them to spend on a mortgage payment is $22,400 per year or $1866 per month including property taxes and insurance. Let’s say taxes and insurance are $300 month, now you’ve got $1566 maximum per month for a mortgage payment. With a 6%, 30 year mortgage this payment can service a $261,000 mortgage. Add a 5-10% down payment to that figure and you have about $280,000 as high as home prices in this neighborhood can rise until reaching the point where the reach buyer resistance because of affordability.

Prices in 2003-2005 Were Artificial and Unsustainable

In many areas home prices reached levels in 2003-2005 that are unsustainable and cannot be supported by buyers. Take this same buyer with $1566 to spend on a mortgage, relax the lending standards, provide more purchasing power with a 3% interest only mortgage. Now $1566 dollars per month will service a $625,400 mortgage. So during 2003-05 our $261,000 house became a $625,000 house. But the $625,000 is unsustainable. Who are you going to sell it to when no one can qualify? The difference between $625,400 and $261,000 is the BUBBLE.
Fundamental #2 Replacement costs
what it costs to rebuild four different quality levels of house based on cost per square foot while isolating the value attributed to the land. Land values are the component of house prices with the greatest sensitivity to market conditions and will rise and fall the most. If land value is a significant percentage of total home costs like most areas of California, watching sales of un-developed land will give you an idea on the direction of home prices.

Replacement costs provide price support on the downside

Provided there is demand, replacement costs provide price support on the downside as prices usually won’t fall below replacement. Competing properties such as new construction will be more expensive and this competition will act a kind as a stabilizing influence to support the value of an existing residence. The exception is if demand for housing is falling in this area due to economics or a declining neighborhood, then this fundamental won’t be as reliable.
Fundamental #3 Value as an income asset
What is the value of the property as an investment asset? To find out we use a calculation that real estate investors use to determine what an income-producing asset is worth.

Capitalization rate, or commonly referred to as CAP rate is the term for the return or yield an investment generates based on the amount of capital invested, expressed as a percentage. For example, an investor has one million dollars of capital at work in a property and that property yields $100,000 per year net after operating expenses, but before debt service. This CAP rate would be 10%. (I.e. $1 million divided by $100,000 equals 10%.) The important thing to remember when calculating CAP rates is that CAP rates are calculated using the net income the asset generates after operating expenses, but before debt service. So the CAP rate is a measurement of how that asset is performing whether the capital is provided by a lender or by the owner of the property. There is an inverse relationship between CAP rates and property values. When CAP rates rise, asset values fall. When CAP rates fall, asset values rise.
It’s the fundamentals of housing that limit how high prices can rise until they hit buyer resistance and how low prices can fall until they reach buyer support levels.

If you’re bold enough to considering buying in this market, how do you know the price you’re paying is one that is prudent and you won’t be buying a property that continues to fall in value?

Answer: The fundamentals will tell you whether the price is one that is sustainable.

If you’re a seller how do you know if you should drop your price now and get the property sold or wait it out and hope for the market to improve?

Answer: The fundamentals will tell you if the current value is sustainable.
My question to you all -
How do you think this site compares to zillow.com ?
How do some of our Texas Coastal markets look? 
Let's take the tool for a ride and see:

77550 Galveston Area

78373 Port Aransas Area

78597 South Padre Area

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