Texas tempers heated up last month when Trulia, a California-based web site, added all three of its major cities to its “Bubblewatch” list of major markets it considers to be overvalued. The designation was not appreciated in the Lone Star State.

Austin, Houston, San Antonio and Dallas are all among the 16 major cities of the 100 cities that Trulia tracks for its “bubble watch” report. The markets are considered overvalued and becoming overheated with housing prices that are ahead of market fundamentals, says Trulia.

Dr. James Gaines, an economist with the Real Estate Center at Texas A&M University, responded that concerns about a price bubble in Texas’ housing markets are overblown. He said some of the recent increases are just making up for several years in the recession when Texas home prices were declining or flat.

“They may have a point in some small pockets, but overall, I think they are premature,” Gaines said. “I think things will slow down – the rates of increase – next year, so it is something of a wait and see.”

Dallas Blogger Candy Evans summarized things for the folks in California: “I how I know “housing shortage” should sound very ominous, but really, we should be celebrating! Thanks to a growing job market, Texas is adding more workers faster than it can build housing for them. According to this story in Bloomberg News, there are bidding wars all over Texas, with some sellers turning down cash offers that would have seemed ample just a few years ago… Still, these numbers and observations seem a little too general for me, as residential real estate is best gauged looking from home to home within a neighborhood, rather than comparing areas as disparate as Portland to Dallas.”