More housing markets overvalued("39% extremely overvalued")

[RedEarth]

WASHINGTON (MarketWatch) -- A growing percentage of U.S. housing markets are "extremely overvalued" and are at risk of falling prices, according to a study based on government data released Monday by Global Insight and National City.

In the first quarter, 71 housing markets, representing 39% of all U.S. housing, were deemed to be "extremely overvalued" based on median sales prices, median income, population and historic values.

That's up from 64 markets accounting for 36% of housing in the fourth quarter. In the first quarter of 2004, just 1% of housing was considered overvalued. To be "extremely overvalued," homes had to be valued at least 34% more than "normal." Read the complete report.
When prices do fall from overvalued levels, they typically fall by about half the overvaluation, DeKaser said. The correction usually takes three and a half years.

The study used the most recent sales-price data from the Office of Federal Housing Enterprise Oversight, which showed that single-family housing prices increased at a 7.3% annual rate in the first quarter, the slowest price gains since 2003.

"Price appreciation is slowing but it continues at a historically high rate, boosted by especially strong increases in already overvalued markets," said Richard DeKaser, chief economist for National City. The most overvalued markets continue to have the highest price appreciation, he said.

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[Joe for Clark]

1. My understanding is - if you go into default -

The bank will do handstands to keep you out of foreclosure.

And they aren't doing that for you.

Joe

[NMDemDist2]

2. I just sold my home in PHX the first weekend it was on the market

with all the gains from the INSANE price run up last summer

I'm cashing out a new place in a much smaller city :bounce:

[LiberalPartisan]

3. A nationwide correction in home prices is overdue

It is amazing what a shoddily built home 300K will buy these days. And if it's new - good luck getting the contractor to complete the punchlist. It has gotten to be where the home building market is like the software market - a home is never really completed, rather it is forever in beta.

[GreenPartyVoter]

4. So true!

[Xithras]

5. I knew the bubble had burst when I heard an ad this past weekend.

One of our local homebuilders, notorious for putting up endless tracts of cookie cutter mcmansions, was running an ad on the radio. "This Weekend Only!" they were offering $75,000 off the price of the home AND a gift certificate for $50,000 worth of furniture at some furniture store. The store obviously isn't giving the stuff away, so that works out to a $125,000 discount on a $475,000 home. That is HUGE. There is no way a builder would do that unless they were is serious hot water.

Another local housing development just up the road from me has ground to a halt. They prepped the land, laid utilities, and put in roads for what looks to be 5-6 suqare blocks of new homes. The crews came in with their equipment a few days later and began framing out three houses (I'd assume models). A week later, the workers vanished with the homes half framed, and someone pulled the housing development sign (with the opening date). I noticed this past weekend that the equipment containers and large construction equipment are all gone too...the half-framed houses are just sitting out there alone and abandoned now.

*POP*

[Jim Warren]

6. Caution Ahead: Falling Objects