WALTHAM, MA -- Extreme Overvaluation in Housing Market "Essentially Nonexistent" Global Insight, the world's leading company for economic and financial analysis and forecasting, today released the second quarter 2008 update of the U.S. housing valuation analysis, House Prices in America, showing that single-family home prices continue to fall across the country, though at a slower rate than last quarter, and that extreme overvaluation of house prices is essentially nonexistent, a sign the nation's housing "bubble" has popped and house prices reflect a healthy balance in relation to long-term fundamentals.
Nationwide, house prices are down 4.8% from a year ago, this housing cycle's peak high point. Prices fell in the second quarter in 152 of the 330 metro areas covered in the study, representing 46% of all single-family housing units in the U.S. The second quarter decline of 5.3% (annualized) compares with a 6.6% decline in the first quarter 2008, which represented 267 (81%) of 330 metro areas. For comparison, 295 (89%) declined in the fourth quarter of 2007.
California, Florida and Michigan continue to account for the most severe losses, representing 43 of the 50 worst performing metropolitan areas. California and Florida had been among the most overvalued states for the past several years. Michigan continues to struggle with the impact of a slumping economy. Other housing markets in the bottom 50 include Las Vegas, Nevada; Phoenix, Arizona; and Washington, D.C. Note that each of these metro areas was previously identified two years ago in our research as being the most vulnerable to price declines.
Six housing markets, down from a peak of 51 in 2005, and virtually unchanged from the first quarter of 2008 (five), were judged extremely overvalued in the second quarter, amounting to 1% of the nation's single family housing stock. Extreme overvaluation is limited to Hawaii, Washington, Oregon and Utah. Pockets of overvaluation remain where they have been - along the East and West Coasts - while the middle of the country remains either fairly valued or undervalued, though some previously overvalued areas of the Northeast and Coastal California and Florida are now rated as fairly valued. Nevertheless, real estate markets are not ready to recover. The building and financing excesses of the boom years have yet to be worked off. There remains a huge inventory of unsold homes on the market with foreclosures adding more daily.
James Diffley, group managing director of Global Insight's Regional Services Group, said, "though the fundamental overvaluation has largely been removed, downward pressures on home prices remain strong."
Jeannine Cataldi, senior economist and manager of Global Insight's Regional Real Estate Service, added, "although the markets that were extremely overvalued two years ago are seeing expected price declines, other areas are seeing price declines due to weak economic conditions. The market has a lot of inventory to work through before prices will change course."
The House Prices in America study, a joint effort by Global Insight and National City Corporation, examines the top 330 U.S. real estate markets, representing 78% of all existing housing units and 91% of all related real estate value, to determine what home prices should be, accounting for differences in population density, relative income levels, interest rates, and historically observed market premiums or discounts. Markets with valuation premiums above 35% were deemed at risk for price corrections based on the typical degree of overvaluation that preceded the 79 known local market price declines observed since 1985.
House Prices in America combines a statistical model originally developed at National City Corporation (www.nationalcity.com/housevaluation) with data largely developed at Global Insight. More information on Global Insight's housing valuation analysis is available at www.globalinsight.com/housingvaluation.
About Global Insight
Global Insight, Inc. (http://www.globalinsight.com/) is a privately held company that brought together the two most respected economic information companies in the world, DRI and WEFA. Global Insight provides the most comprehensive economic and financial information available on countries, regions and industries, using a unique combination of expertise, models, data and software within a common analytical framework to support planning and decision-making. Through the world's first same-day analysis and risk assessment service, Global Insight provides immediate insightful analysis of market conditions and key events around the world, covering economic, political, and operational factors. The company has over 3,800 clients in industry, finance, and government with revenues in excess of $105 million, over 675 employees and 25 offices in 14 countries covering North and South America, Europe, Africa, the Middle East, and Asia.
About National City Corporation
National City Corporation (NYSE:NCC), headquartered in Cleveland, Ohio, is one of the nation's largest financial holding companies. The company operates through an extensive banking network primarily in Ohio, Illinois, Indiana, Kentucky, Michigan, Missouri, Pennsylvania and Florida, and also serves customers in selected markets nationally. Its core businesses include commercial and retail banking, mortgage financing and servicing, consumer finance and asset management. For more information about National City, visit the company's Web site at www.NationalCity.com .
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Source: Global Insight
CONTACT: James Diffley, Grp. Mgng. Dir., Regional Services,
+1-610-490-2642, james.diffley@globalinsight.com, or Jeannine Cataldi, Sr.
Economist, Mgr. Real Estate Srv., +1-610-490-2650,
www.jeannine.cataldi@globalinsight.com, or Jim Dorsey, Sr. Mgr., Media Relations,
+1-781-301-9069, jim.dorsey@globalinsight.com, all of Global Insight
Web site: http://www.globalinsight.com/
http://www.nationalcity.com/
http://www.globalinsight.com/housingvaluation
http://www.nationalcity.com/housevaluation
About This Release
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