Normally I don’t just repost straight news stories. But I thought this one had some interesting data. So here it is. From CNNMoney.com….
Most Overvalued Housing Markets
Latest analysis of 299 markets: See how your hometown ranks.
By Les Christie, CNNMoney.com staff writer
January 3, 2006: 2:33 AM EST
NEW YORK (CNNMoney.com) – Sixty-five of the nation’s 299 biggest real estate markets are severely overpriced and subject to possible price corrections.
That’s according to the latest (third quarter) Housing Market Analysis conducted by National City Corp, a financial holding company, in conjunction with Global Insight, a financial information provider.
The report named Naples, Florida as the most overvalued of all housing markets in the United States. A single-family, median-priced home there sells for $329,970, 84 percent more than what it should cost — $180,956 — according to the analysis. {Jay’s note: I have no idea what “analysis” was done to determine what a median priced home “should cost”… I’d really like to see their “analysis”. Remember, there are “lies, damn lies — and statistics” — a quote frequently attributed to Mark Twain….and incorrectly I might add. But I digress}
National City arrives at its estimates of what the typical house in these markets should cost by examining the town’s population densities, local interest rates, and income levels. It also factors in historical premiums and discounts for each area.
Other markets deemed wildly overpriced included Merced, California (by 77 percent), Salinas, California (75 percent), and Port St. Lucie, Florida (72 percent).
Undervalued markets were College Station (-23 percent), El Paso (-18 percent), and Killeen (-16 percent), all in Texas. That state dominated the discounted markets list with nine of the 10 most undervalued housing markets. Montgomery, Alabama was No. 8 among the undervalued markets.
The data did produce some evidence of prices moderating, according to National City’s chief economist, Richard DeKaser.
In Massachusetts, for example, one of the hottest of housing markets over the past few years, each of the seven housing markets analyzed was still overvalued. Prices, however, had fallen in all seven. That would indicate the state is trending back toward normal valuations.
The same could not be said of Florida. The Sunshine State had 15 different markets on the list of extremely overpriced metro areas and all 15 had grown more overpriced during the quarter.
Amidst all these hot and cold markets there were a few judged, like Goldilock’s porridge, “just right.” They included Albuquerque New Mexico, Dayton Ohio, and Omaha Nebraska. In all those towns actually selling prices closely tracked the expected values.
Read on for a table listing cities and their ranking…
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I shall refrain from comment on the fact that College Station, TX is at the bottom of the pile. For those who don’t know, College Station is the home of Texas A&M University—THE University of Texas’ arch rival. This report showing the A&M hometown at the bottom of the heap came out the day before UT was crowned national football champions. Ironic isn’t it?
The Phoenix Real Estate Guy was started by Jay Thompson, and I have a little blogging problem... he liked to say...
Football and irony. Hmm.. Great read, Jay! Thanks for the article. Normally, discrepancies don't alarm me, but when they do infringe on even the most basic right of humans to live, I go ballistic.
And here we are hoping that big real estate bubble doesn't burst.
On another note, re: the previous post on the fall of the SFH units and the rise of the condos, personally I think college kids really ought to leave home to learn to be more independent, although closer and tightly-knit families are good too.
5707
If you are a student, you can claim your Student Credit Card now!
The bubble will burst soon. Those are some pretty alarming numbers, and they make me feel worried.
i think that the bubble already bursted
The one problem i see with the guide is florida has alot of snow birds. So the income in the area does not effect home prices as much because out of towners might have more money. I know real estate should be based on income for area because if homes are priced to high no one can buy them so prices drop.
That's a pretty great list, thanks for that. It's hard to believe that there are such disparities between market price and actual market value. And I too would be interested in how these analyses were really performed.
In the past 12 months, US house prices have fallen by nearly 15%. This reflects a correction to a period of rapidly rising house prices, fuelled by cheap lending. However, the concern over house prices is not limited to the US. In fact, a study by the IMF suggests that many other countries have house prices that are overvalued relative to earnings, rent prices and other long term house price trends.
According to the IMF, house prices are most overvalued in Ireland (30%), Netherlands and Britain (29%) America by contrast have house prices overvalued by only 10%. Therefore, there is a real possibility of housing slumps in other countries; if these housing slumps occur it could trigger slowdown in global growth, especially in Europe and OECD economies.
Regards,
Michael McLaughlin, Cary real estate
If housing slumps occur in many of the major countries around the world, like Michael says, that will be a really huge problem globally. Everyone needs somewhere to live, so the effects of such a slump would be very far-reaching. I sure hope it doesn't get that bad, but looking at the direction things have been going in the past year it looks like it may be a very realistic possibility.
That is not fair…and now realtor don't even want to adjust their mortgage plan to homeowner's whose houses are in the brick of foreclosure. So even if the economy is down, lender does not really lost money. Well, I just wish homeowners who's house are in foreclosures read you blog, so they can ask somebody to revalue their house, if the value they got when they bought is fair or overpriced. If it is overpriced they can forced the lender to low it down.
That is not fair…and now realtor don't even want to adjust their mortgage plan to homeowner's whose houses are in the brick of foreclosure. So even if the economy is down, lender does not really lost money. Well, I just wish homeowners who's house are in foreclosures read you blog, so they can ask somebody to revalue their house, if the value they got when they bought is fair or overpriced. If it is overpriced they can forced the lender to low it down. Cheers, Michael McLaughlin, Cary real estate
Interesting to see York, PA on there. I certainly wouldn't want to live there.
excuse me obama, please bailout my mortgage…
Even if the bubble bursts, there will be areas that feel the effects less than others. These are the times when smaller, more stable local economies will reap the benefits that usually pass them by.
I agree with the previous commenter. Some areas are much more stable and are not being hurt as badly. I think Seattle is getting hit less hard, though that may change any day. Generally the areas with the most inflated home values will be the hardest hit.
This data is shockingly scary at the moment. I feel sorry for people who are constantly losing their home value and do not know what to do.Great article Jay on this.
This data is shockingly scary at the moment. I feel sorry for people who are constantly losing their home value and do not know what to do.Great article Jay on this.