Bend, Oregon: The Most Overvalued Housing Market
A leading company for economic and financial analysis and forecasting has released a first-quarter 2007 update of its House Prices in America study.
The updated housing valuation analysis shows a wide drop in single-family home prices, resulting in a decline in the incidence of overvaluation in the nation’s housing market.
The overall number of single-family housing units deemed to be overvalued fell from 17 percent in the fourth-quarter 2006 to 14 percent (revised).- Meanwhile, in terms of single-family asset value, the percent deemed to be overvalued fell to 25 percent from 33 percent (revised).
A big reason for the rise in home prices that are now starting to fizzle were record low mortgage rates, fueling a five-year boom. Now that bubble is starting to deflate.
Nationally, single-family home prices increased in the first quarter at an annual rate of 2.2 percent. On a year-over-year comparison, however, prices are up only 3.0 percent, further normalizing the market with the weakest gain in a decade.
Nearly 50 percent or 157 of the 317 areas in the study experienced price declines in the first quarter, accounting for 38 percent of all single-family units and half of all single-family real estate assets.
The most highly concentrated declines, while widely dispersed, occurred in areas hit by bad credit home loan problems and places that had experienced the most dramatic run-up in overvaluation, including California, Florida, New York, and New England.
The Midwest was hit hard by cutbacks in automobile manufacturing. The most dramatic declines among the nation’s large metro areas were seen in the Central Valley of California.
The Sacramento housing market, where prices fell by 8.2 percent in the past year and 10.0 percent since 2005, experienced the greatest decline among the nation’s large metro areas.
Prices were most resilient in the housing market in the American regions of the Pacific and Mountain Northwest, most of Texas, and the Carolinas.
Markets identified in the study as overvalued decreased to 54 metro areas in the first quarter, down from 62 metro area markets (revised) in fourth-quarter 2006.
Th most overvalued markets in the country are now Bend, Oregon and Prescott, Arizona, highlighting the precarious nature of the price resiliency in the interior West.
Meanwhile, the most undervalued markets continued to be in the state of Texas, specifically Dallas (24.9 percent) and the Houston housing market (22.1 percent).
James Diffley, director of Global Insight’s Regional Services Group, said:
“The price declines we are seeing today in California, Florida, and New England were predicted two years ago when we identified them as the most extremely overvalued markets in the nation. Widespread weakness across the country is a reflection of the dramatic swing in sentiment and bargaining power between buyers and sellers.”
“Going forward, the accelerating declines in California, where home prices crested earliest warn of further declines elsewhere. The glut of new and existing homes for sale on the market, and the tightening of credit standards in light of the [bad credit mortgage] troubles, will continue to exert downward pressure on prices for some time.”
SOURCE: Bend Weekly