Tuesday, September 11, 2007

How overvalued is the Inland Empire’s real estate?

How overvalued is the Inland Empire’s real estate?

According to Global Insight, the world's leading company for economic and financial analysis and forecasting the Inland empire is overvalued by 55%! On the bright side we did beat Madera (70.9%) and Merced (69.4%). LA was listed as 51% overvalued and the OC came in at a more respectable 25% (which seems way low to me). This low number might be skewed down by the low end areas like Santa Ana, Tustin etc.

So, Global insight calculates that the IE is overvalued 55%. According to the charts I played with from the NAR a couple of posts ago that’s right in the middle of the range I came up with too. The last report I saw from them we were actually a few percentage points higher. It looks with the prices are coming dow, it's making homes slightly more affordable.

How much has the medial price fallen from the peak? From the data I have been able to find Riverside’s median home price topped out at $485,000 in May of 2006. Currently the Median for Riverside is $419,000 which represents a 13.5% drop in a little over a year. Much of that 13.5% has happened in the last 6 months. In other words the rate of depreciation is accelerating. If the rate of depreciation remains the same it would take 4 years for homes to get back into the “normal” median range of 2x to 3x median income. Unless hyperinflation kicks in or we all get big fat increases in pay (dunno about you, but I’m fairly sure that’s not gonna happen to me).

Riverside Median from 8/2005 to 7/2007

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