Thursday, December 13, 2007

The IE still 44.6% Overpriced

According to a new study be Global Insight the IE is still 44.6% overvalued. That's better than last year when they found us 65% overvalued. Of course the median price has declined about $70k from last year which is why we dropped.

Here's the article

Study Says 63% of U.S. Housing Markets Are Overvalued
Published Dec 11, 2007
A new study from Global Insight and National City analyzes house prices in America. Data shows that the majority of U.S. metropolitan areas remain overvalued despite falling home prices. Nearly one-third are considered 'extremely overvalued.'
Overvaluation continues to be the norm in Pacific Coast states, Florida and the Washington D.C. area, according to data from Global Insight.

Out of the 330 metro areas examined in its most recent quarterly study, 208 U.S. metros were marked as overvalued--117 documented an increase in overvaluation during the third quarter compared to the second quarter.

To determine what house prices should be, Global Insight considered interest rates, household income, population density, current and former house prices and historical data.

The 20 Most Overvalued Housing Markets

Metro Area 2007 Q3 Home Price Overvaluation
Bend, Oregon $320,100 70.0%
Atlantic City, NJ $273,700 64.4%
Madera, CA $291,600 62.3%
Merced, CA $248,300 56.6%
Prescott, AZ $237,600 53.6%
St George, UT $257,700 51.0%
Flagstaff, AZ $269,200 50.3%
Miami, FL $304,000 48.0%
Medford, OR $279,100 47.8%
Portland, OR $316,600 47.5%
Wenatchee, WA $263,400 47.0%
Bellingham, WA $305,000 47.0%
Ocean City, NJ $328,900 46.9%
Mount Vernon, WA $299,100 46.7%
Longview, WA $211,800 45.1%
Honolulu, HI $666,800 45.1%
Eugene, OR $251,700 44.8%
Riverside-San Berdu $329,600 44.6%
Bakersfield, CA $219,300 42.0%
Los Angeles, CA $512,900 42.0%

Source: Global Insight

Bend, Oregon, is the nation's most overvalued housing market according to the quarterly study. At 70 percent, Bend falls just ahead of Atlantic City, New Jersey, and Madera, California.

Other metro areas that dominated the list included cities in California, Washington, Arizona, Oregon and Florida. All of the cities in the top 20 were overvalued by at least 40 percent.

Home Price Corrections

Home prices have already begun to fall in overvalued (and other) metro areas. During the third quarter of 2007 prices declined in 171 out of the 330 metro areas analyzed in the survey. Eighteen of these areas documented declines of 10 percent or more.

Homeowners living in overvalued markets can expect additional declines over the next three years. The extremely overvalued markets (valuations in excess of +33 percent) are considered to be the markets most at risk for a steep price correction. Price corrections are generally defined as declines of at least 10 percent.

Areas that have experienced price corrections in the past 20 years have declined an average of 17 percent. The median duration of the correction is 17 quarters.


Briar said...

So if I offer someone half his listing price, he wont be insulted, right?

Anonymous said...

Why not, be sure to add that any negotiations will result in a lower offer, not a higher one. Most of the homes on the market have been there so long they should consider any offer. Of course they may be insulted, but who cares.

Snob from Morgan Hill said...

I am (as a buyer) being insulted with the current listing price...

golfer_X said...

I am (as a buyer) being insulted with the current listing price...

AMEN brother!

Fred said...

In the IE being 40% overvalued would bring us to 2001 prices give or take. That means homes will go for about 180K to 240K. Not bad. Affordable and will make the commute to OC a bit easier to take.

toothlesselsinorewhore said...

I write 40-50 offers per month on REO properties. Everyone of them is for 60-65 cents on the dollar and believe me my value of the house is much more conservative then what the banks think they are worth. To the bank I'm offering 35-40 cents on the dollar because they employ the same logic that got them into this mess when it comes to their appraisals and BPO's. I always get a good laugh when an agent says the banks appraisal says a 1400 square foot 3/2 in MoValley built in the 80's is worth 325k. Yet that same model down the street has been on the market for six months at 250k with no takers.

I love it when an agent yells at me!

golfer_X said...

Most of the REO properties I see would still be overpriced at 60%-65% of asking price. You still couldn't rent them and make any money. Only the ones that are already priced low would be a decent deal at 60 cents on the dollar. In addition, rents are now beginning to fall with all the competition from the failed flips and upside down owners

smokincrackmakespricesgohigher said...

I often want to call these realtors and ask them, "So, did you and the homeowner sit down and smoke a bowl together and then determine the price you have listed? You really must have because the price you're listing is way too 'high' "

But, given most realtors don't have much in the way of funny bones these days, I refrain.