Why the bubble burst? Are some markets undervalued?

Two interesting articles in the paper today; one discusses why there was a real estate bubble burst. It says through the first half of this decade median household incomes dropped, the poverty rate/unemployment and house values increased causing the average worker to get further behind. Americans financed their spending habits by treating their houses like giant ATM's. I had read another article in the NY Times stating the same thing but using statistics instead. Once home prices rise above a certain percentage then homeowners stop buying.

Second article says some markets are now way undervalued; Modesto CA, Naples FL, Las Vegas NV and Des Moines IO are all undervalued between 11-23%. The study considered interest rates, household incomes, population densities and historic data to determine fair value.