McLEAN, VA—The single-family housing market is on track to have a very good year, according to Freddie Mac's Insight & Outlook for August. However, it also notes, the issue of overheated property valuations is always lingering in the background. Unfortunately, it reminds readers, affordability metrics "cannot reliably predict if or when house prices in a particular market -- or the nation as a whole -- will fall."

The nation, though, appears disinterested in such dark talk. Or perhaps consumers are eager to lock in the one sure thing about a housing purchase: its financing rate. Freddie Mac has revised its estimate of mortgage originations for 2015 upward to $1.45 trillion and to $1.3 trillion for 2016 in large part due to stronger-than-expected refinance activity and home sales.

It also increased its projection of 2015 home sales to 5.73 million units, which would be the best year since 2007.

The refinance activity bodes both well and poorly for consumers' overall long-term financial wellbeing, depending on which metric one looks at.

The GSE reports that cash-out refinances -- generally not a good idea unless the money is invested in home improvements and even then that is an iffy investment given uncertain valuations -- increased from 27% of refinances in the first quarter of this year to 34% in the second quarter. A year ago, the cash-out share was 22%. However, during the housing boom, the cash-out share peaked at 89% in the third quarter of 2006.

On the other hand, an increasing share of refinancing borrowers chose to shorten their loan terms. Of borrowers who paid off a 30-year fixed-rate loan in the second quarter, 40% chose a 15-or 20-year loan, compared to 39% in the first quarter.

Now, about the question of valuations. It is a mistake to rely primarily on statistics to judge whether a particular market is overvalued, says Chief Economist Sean Becketti. "At best, affordability statistics wake us up to potential danger," he says. "In this way, they are like the signs posted every summer in national parks that indicate the current danger of a forest fire. We recognize when the danger is elevated, but we can't predict for sure if or when someone will accidentally drop a match in the wrong spot."