Housing Prices Continue to Decline Nationwide
December 03 2008 - 9:30AM
Business Wire
IHS Global Insight, the world's leading company for economic and
financial analysis and forecasting, today released the
third-quarter 2008 update of the U.S. housing valuation analysis,
House Prices in America, showing that single-family U.S. home
prices fell at a faster pace across a wide area of the country �
after moderating earlier in the year � and are now 6.5% below their
2007 peak. House prices fell at a 6.9% annualized pace, affecting
241 of the 330 analyzed metropolitan areas, up from 150 metro areas
in the second-quarter 2008. For the United States as a whole, the
housing market is now slightly undervalued. When weighted by market
value, the nation is 3.8% undervalued; when weighted by housing
units, it is 5.7% undervalued. While the contraction in residential
real estate value is national in scope, it is most severe in the
Southeast and Southwest, areas which were among the most overvalued
in the country three years ago. According to the third-quarter
analysis, extreme overvaluation is now "essentially nonexistent" �
only three metro areas met the definition of extreme overvaluation,
down from a peak of 52 metro areas in 2005. Only the Pacific
Northwest remains overvalued. According to the analysis, the
overhang of unsold properties trending downward during the third
quarter, and demand picking up slightly, the accelerated pace of
depreciation likely reflects financing conditions that became
increasingly stringent and expensive during this period. Recent
policy responses, from the Federal Reserve in particular, to
purchase mortgage-backed securities are not likely to have a
significant impact until next year. Home prices fell more than 10%
in the third quarter in nine central California communities. The
Central Valley communities of Merced, Stockton, and Modesto have
seen property values fall to less than half their 2005 value.
Twenty-nine metro areas in California, Florida, and Nevada � at one
time among the most overvalued � have seen price declines in excess
of 30%. Similar steep price drops are also occurring in Michigan,
northeast Ohio, the southern metro areas from Charlotte to Atlanta,
as well as in New England. The incidence of extreme overvaluation
has become negligible; only Atlantic City, New Jersey; Bend,
Oregon; and St. George, Utah met the criteria. Overvalued markets
are mainly located in the Pacific Northwest, extending to Utah.
Southern metro areas from Mississippi to Texas remain generally
undervalued. Jeannine Cataldi, senior economist and manager of IHS
Global Insight's Regional Real Estate Service, added, "Weak
economic conditions and wary consumers continue to hold the housing
market back. Although many areas are seeing home sales increase, it
is largely due to foreclosure homes being snapped up at
significantly discounted prices. As the inventory of these homes is
removed from the market, prices will remain on a downward path."
James Diffley, group managing director of IHS Global Insight's
Regional Services Group, said, "With no end in sight to the
downward spiral of house prices, it is likely that long anticipated
market correction will now overshoot fundamental valuations on the
downside.� The House Prices in America study, a joint effort by IHS
Global Insight and National City Corporation, examines the top 330
U.S. real estate markets, representing 78% of all existing housing
units and 86% 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 by
Richard DeKaser, Chief Economist at National City Corporation
(www.nationalcity.com/housevaluation) with data largely developed
at IHS Global Insight. More information on IHS Global Insight's
housing valuation analysis is available at
www.globalinsight.com/housingvaluation. About IHS Global Insight
IHS Global Insight (www.globalinsight.com) 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, IHS
Global Insight provides immediate insightful analysis of market
conditions and key events around the world, covering economic,
political, and operational factors. IHS (NYSE: IHS, www.ihs.com) is
a leading global source of critical information and insight that
enables innovative and successful decision making for customers
ranging from governments and multinational companies to smaller
companies and technical professionals. IHS employs approximately
3,800 people in 20 countries. 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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