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Home prices should essentially follow inflation and if they are exceeding inflation then that indicates a bubble. Bubbles don't always burst though, because pricing can be corrected by flattening out and allowing inflation to catch up. That's why your primary residence really shouldn't be considered an investment.
You provided no detail on how a refi is 37% more expensive per month. They could have gone from a 30 year to 10 year loan. They could have added taxes/insurance to their escrow. They could simply be making more than minimum payments on the principal. Lots of lots of ways for a monthly payment to be more or less.
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