people willing to pay the prices that are being asked, a housing market isn't overpriced.
A realtor I know was telling me recently that the people who keep track of such things believe it will still be another 3-4 years before the supply catches up with the demand. They aren't predicting that this year will be as crazy as last year (with double digit growth in home prices), but they think there will be plenty of demand to keep the prices increasing for a while.