Fewer metro areas riding for a fall in the third quarter, study finds, with Massachusetts cities correcting toward normal and Florida cities soaring.
By MSN Money staff
The number of housing markets rated extremely overvalued declined in the third quarter, according to an analysis released Friday. National City/Global Insights Housing Valuation Analysis showed 65 of the 299 metro areas it surveyed as 30% or more overvalued, compared with 67 in the second quarter of 2005.
Four new metro areas joined the list of extremely overvalued markets: Honolulu, Hawaii; Orlando, Fla.; Pensacola, Fla.; and Phoenix, Ariz. Moving off the list of extreme overvaluation were Essex County, Mass.; Worcester, Mass.; Jackson, Mich.; Bay City, Mich.; Portland, Maine; and Charlottesville, Va. Generally, Massachusetts is experiencing a return to more normal valuations, analysts said, while Florida is doing the opposite.
Whos on the brink?
The study examines the top 299 U.S. real estate markets to determine what home prices should be, looking at differences in population density, relative income levels, interest rates, and historical market premiums or discounts. Markets with valuation premiums above 30% are considered at risk for price corrections based on the typical degree of overvaluation that preceded the 63 known crashes observed since 1985.
Seventy-seven metro areas were considered undervalued in the third quarter, up substantially from 54 in the second quarter.
The most undervalued markets were mostly in Texas, Indiana and Alabama. Homes in College Station, Texas, were the most undervalued at 22.5% below what National City considered normal valuation.
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"We are beginning to see more diversity among metro areas. Not all are moving toward loftier valuations, as was the case during the 2003-2004 period," said Richard DeKaser, chief economist at National City. "Whether the most extremely overvalued markets will have an orderly price correction to more normal, historic levels remains to be seen."
| Overvalued housing markets | | Metro area | Overvalued | Metro area | Overvalued | | Naples, Fla. | 84.0% | Prescott, Ariz. | 46.4% | | Merced, Calif. | 76.7% | Panama City, Fla. | 45.8% | | Salinas, Calif. | 74.8% | San Diego, Calif. | 45.8% | | Port St. Lucie, Fla. | 72.2% | Visalia, Calif. | 44.9% | | Stockton, Calif. | 72.0% | San Jose, Calif. | 44.3% | | Madera, Calif. | 69.9% | Deltona, Fla. | 44.2% | | Santa Barbara, Calif. | 69.7% | Santa Cruz, Calif. | 43.7% | | Modesto, Calif. | 66.9% | Santa Ana, Calif. (Div) | 43.6% | | Napa, Calif. | 65.5% | Bellingham, Wash. | 43.2% | | Riverside, Calif. | 64.8% | Fort Walton Beach, Fla. | 43.2% | | Medford, Ore. | 64.1% | Nassau-Suffolk, N.Y. (Div) | 42.7% | | Sacramento, Calif. | 61.5% | Poughkeepsie, N.Y. | 39.2% | | Atlantic City, N.J. | 58.6% | Reno, Nev. | 38.4% | | Chico, Calif. | 58.5% | Las Vegas, Nev. | 38.2% | | Fresno, Calif. | 58.0% | Kingston, N.Y. | 38.1% | | West Palm Beach, Fla. (Div) | 56.9% | Washington, DC-Va.-Md.-W.Va. (Div) | 37.2% | | Redding, Calif. | 56.3% | Bethesda, Md. (Div) | 35.7% | | Santa Rosa, Calif. | 56.1% | Providence, R.I.-Mass. | 34.9% | | Bend, Ore. | 56.0% | San Francisco, Calif. (Div) | 34.9% | | Sarasota, Fla | 55.6% | St. George, Utah | 34.9% | | Miami, Fla. (Div) | 55.3% | Ocala, Fla. | 34.8% | | Oxnard, Calif. | 54.8% | Phoenix, Ariz. | 34.8% | | Vero Beach, Fla. | 54.3% | Portland, Ore. | 34.7% | | Los Angeles, Calif. (Div) | 54.2% | Eugene, Ore. | 33.8% | | Fort Lauderdale, Fla. (Div) | 52.8% | Tampa, Fla. | 33.7% | | Vallejo, Calif. | 52.6% | Pensacola, Fla. | 33.2% | | San Luis Obispo, Calif. | 52.5% | Orlando, Fla. | 32.7% | | Cape Coral, Fla. | 51.9% | Grand Junction, Colo. | 31.4% | | Bakersfield, Calif. | 51.1% | Honolulu, Hawaii | 31.3% | | Palm Bay, Fla. | 48.7% | Edison, N.J. (Div) | 31.3% | | Barnstable Town, Mass. | 48.0% | Duluth, Minn.-Wis. | 30.8% | | Oakland, Calif. (Div) | 47.4% | Jacksonville, Fla. | 30.5% | | Ocean City, N.J. | 46.7% | | |
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Source: National City/Global Insight
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