This paper examines the assessment of high house prices in the United States, focusing on whether they are driven by fundamental factors or unsustainable bubbles. The authors construct measures of the annual cost of single-family housing for 46 metropolitan areas over the last 25 years and compare them with local rents and incomes to judge the level of housing prices. They argue that conventional metrics like the growth rate of house prices, the price-to-rent ratio, and the price-to-income ratio can be misleading because they do not account for the time series pattern of real long-term interest rates and predictable differences in the long-run growth rates of house prices across local markets. These factors are particularly important in recent years, as house prices are more sensitive to interest rates when rates are already low, and even more so in cities with high expected price growth. The analysis reveals that from 1995 to 2004, the cost of owning rose somewhat relative to the cost of renting but not to levels that made houses look overvalued. The authors find that in 2004, only a few cities, such as Miami, Fort Lauderdale, Portland, and San Diego, had valuation ratios approaching those of the 1980s. They conclude that while the data do not indicate bubbles in most cities in 2004, the sustainability of house prices depends on underlying economic fundamentals, such as real, long-term interest rates and income growth.This paper examines the assessment of high house prices in the United States, focusing on whether they are driven by fundamental factors or unsustainable bubbles. The authors construct measures of the annual cost of single-family housing for 46 metropolitan areas over the last 25 years and compare them with local rents and incomes to judge the level of housing prices. They argue that conventional metrics like the growth rate of house prices, the price-to-rent ratio, and the price-to-income ratio can be misleading because they do not account for the time series pattern of real long-term interest rates and predictable differences in the long-run growth rates of house prices across local markets. These factors are particularly important in recent years, as house prices are more sensitive to interest rates when rates are already low, and even more so in cities with high expected price growth. The analysis reveals that from 1995 to 2004, the cost of owning rose somewhat relative to the cost of renting but not to levels that made houses look overvalued. The authors find that in 2004, only a few cities, such as Miami, Fort Lauderdale, Portland, and San Diego, had valuation ratios approaching those of the 1980s. They conclude that while the data do not indicate bubbles in most cities in 2004, the sustainability of house prices depends on underlying economic fundamentals, such as real, long-term interest rates and income growth.