Skip to main content

NAMB debuts re-vamped Web site

Jan 05, 2006

Study finds 31 percent of housing market "extremely overvalued"MortgagePress.comFederal Reserve, housing market, statistics In his monetary policy report to the U.S. Congress on July 20, Federal Reserve Board Chairman Alan Greenspan stated, "Whether home prices on average for the nation as a whole are overvalued relative to underlying determinants is difficult to ascertain, but there do appear to be, at a minimum, signs of froth in some local markets where home prices seem to have risen to unsustainable levels." Greenspan's statements fueled speculation about whether the U.S. housing market was experiencing a housing bubble." If the housing market is overvalued, then the consequences for homeowners, securities investors, real estate developers, lenders and the economy at large could be severe. But no consensus opinion currently exists regarding the valuation of the housing market. To remedy that situation, National City Corporation Chief Economist Richard J. DeKaser and his research assistant, John G. Charamonde, have conducted a study, "House Prices in America: Valuation Methodology and Findings," that seeks to determine whether and how much of the U.S. housing market is overvalued. According to the study, 53 metropolitan areas, representing 31 percent of the U.S. housing market are "extremely overvalued" and face a high risk of price declines. The study examined the top 299 real estate markets in the U.S. representing 80 percent of single-family housing in the nation, during the period from 1985 to 2005. Price-to-income ratios were statistically explained by household population density, mortgage interest rates, relative income levels and the unique characteristics of each metropolitan area. Markets were considered "extremely overvalued" when the observed prices surpassed statistical norms by 30 percent or more. Based on the 63 known local market price declines observed since 1985, the study deemed that markets with valuations above 30 percent were at high risk for price corrections. Price corrections were defined as price declines of 10 percent or more that lasted for two or more years. Among the conclusions drawn by "House Prices in America: Valuation Methodology and Findings," was that California, southern Florida, and parts of the greater New York (e.g. Nassau and Suffolk counties, and Ocean City, N.J.) and greater Boston (e.g. Barnstable, Mass.) areas have a disproportionate concentration of high-risk markets, with Santa Barbara, Calif. leading the way at 69 percent above the norm. For more information or to obtain a copy of the study, visit www.nationalcity.com/economics.
About the author
Published
Jan 05, 2006
Bank On Borrowers, Not Rate Predictions

Chasing rate forecasts wastes resources better spent on cold, hard business

Dec 10, 2024
Rocket Mortgage Sues HUD Over Regulatory, Enforcement Discrepancies

Rocket seeks dismissal of the DOJ's October lawsuit alleging the lender committed racial appraisal bias.

Dec 05, 2024
West Capital Lending Acquires Locally-Focused Brokerage, Red Tree Mortgage

The 2024 Broker Brawl reaffirmed West Capital's commitment as a relationship-focused lender

Dec 03, 2024
First FICO 10T-Backed MBS Issuance Achieved

Comprised of VA loans, the pool offers proof of concept for changes to be required by the FHFA by late 2025.

Dec 03, 2024
BAC Co-Founder Reveals Mega Brokers May Undergo CFPB Audits

Brendan McKay of BAC revealed the main takeaways in a LinkedIn post

Dec 02, 2024
AnnieMac Data Breach Impacts 171,000 Customers

Letters detailing the Aug. 23 breach were mailed to thousands of affected customers across multiple states last week.

Nov 18, 2024