Good study update, but I wonder what an "orderly price correction" looks like? And does it matter if it's "orderly" or "instant" - a price decline is a price decline...
Sure am glad I didn't buy real estate this summer in Phoenix, Florida or California! Those who did are likely heading towards Chapter 11 filings about now whether they know it or not...
While the incidence of overvaluation clearly increased, we are beginning to see more diversity among metro areas. Not all are moving toward loftier valuations, as was the case during the 2003-2004 period," said Richard DeKaser, chief economist at National City Corp. "Whether the most extremely overvalued markets will have an orderly price correction to more normal, historic levels remains to be seen."
According to the "Global Insight/National City Housing Valuation Analysis," the number of extremely overvalued markets declined to 65 in the third quarter from 67 in the second quarter.
Four new metro areas joined the list of extremely overvalued markets, while six cities dropped off the list, National City Corp. reported. Newly included among the extremely overvalued are: Honolulu; Orlando; Pensacola, Fla.; and Phoenix. Moving off the list of extreme overvaluation was Essex, Mass.; Worcester, Mass.; Jackson, Mich.; Bay City, Mich.; Portland, Maine; and Charlottesville, Va.
The analysis found that the move overvalued markets are: Naples, Fla., 82.3 percent; Santa Barbara, Calif., 78.2 percent; Salinas, Calif., 76.8 percent; Merced, Calif., 74.6 percent; Stockton, Calif., 71.5 percent; Port St. Lucie, Fla., 68.1 percent; Modesto, Calif., 66.2 percent; Madera, Calif., 66.1 percent; Napa, Calif., 64.2 percent; and Medford, Ore., 63.8 percent.
December 09, 2005
About 38 percent of the top 299 metro housing markets "are extremely overvalued and at risk for a price correction
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2 comments:
Florida real estate is crazy. Many, many people will wind up in CH 11 without any place to live. There is no way that people can continue to afford the high prices of housing around here with the measly wages being paid. If the mortgage payments are to be made all other spending must stop.
People trading up are not immune either. Buying for 100K, selling for 200K, then buying a 400K house with 100K down won't save you when the 400K house drops to 300K.
The highest priced homes will be hit the hardest so those who feel they are the smartest will soon be the dumbest.
Some of this is an artifact of the reporting areas and special cases and especially the methodology. I also have no idea where they got their Q3'05 median prices. The Oxnard example says $518,447 yet the reported data is closer to $620k. That's not explainable by different sources. Indeed only 6 of the 25 zipcodes in the entire county are below $620k.
The Santa Barbara example includes a discussion of a "QoL" quality of life factor but only places it at 2.7 times income. That is wrong because of the large number of retired people who live there. Obviously the same would go for that other standout Naples, FL.
In short, no go data from their efforts. Sure, there's still a bubble and sure these places are overvalued but no way is this quantatative ranking valid.
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