Tumbling home prices have overshot, and many regions are now undervalued, according to a report from IHS Global Insight and National City Corp.
Nationwide home prices fell by a 6.9 percent seasonally adjusted annualized pace in the third quarter, faster than the 5.6 percent drop in the second quarter, due to foreclosure sales and tougher lending standards. Buyers need more than a pulse to get a loan, they have to qualify for a loan and prove it.
Five quarters of declines have caused the U. S. housing market to become broadly undervalued by about 5.7 percent in the quarter. Overvaluation peaked at 15.8 percent in mid 2006. Only three regions — St. George, Utah; Atlantic City, N. J.; and Bend, Ore. — appear to be extremely overvalued, the study said. On the flip side, regions like Las Vegas that saw the greatest gains during the housing boom are among those suffering the most now.
The Federal Reserve’s plan to buy up to $600 billion in mortgage-backed securities and other debt could help ease financing tightness, but probably not until next year, says Jeannine Cataldi, senior economist with IHS Global Insight. “Until the excess [home] inventory is absorbed, we could see prices fall,” Cataldi says.
The study considered interest rates, household incomes, population densities and historic data to determine fair values.
Click on the map below for a link the interactive home valuation report.
Modesto, CA $164,063 -23.6% Austin,TX $181,634 -9.0%
Naples, FL $245,023 -19.7% Santa Fe,NM $295,223 9.1%
Las Vegas, NV $191,529 -18.8% Olympia, WA $255,601 18.0%
Des Moines, IA $127,158 -11.1% Atlantic City, NJ $247,743 43.0%
Sources: Global Insight, National City Corp.
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