There is no place in the United States where housing prices have not taken a tumble. One question on everyone’s mind is whether the housing prices have come close to hitting bottom, or whether they still have a while to go before they reach the bottom.
CNNMoney has issued a series of reports on the housing market. In January of 2006 they released a report that many housing prices were overvalued. Some as much as by 84%. This was during the period of steady growth and rampant optimism. In that report, housing prices in nearly every area were overpriced, with many area’s being in the dangerous area of over 30% overvalued.
The basis for the overvalued and undervalued figures are on sound principles. These figures measure things like, local interest rates, average income the population, population density, median home prices and historical premiums for the area. (such as the increase in home prices in a nice area like San Diego). The results of these figures is what a home SHOULD be selling at for an area compared to what it is selling at.
A large undervalue does not mean that the price will stop dropping, but it does seem as though there could be a lot of inherent value in the property when it does begin to rise again. It certainly gives a fair indication of potential for the property.
♦ America’s most overvalued cities
In the original list that was compiled in 2006 nearly all areas were overvalued. Many area’s even had over a 30% overvalue, with a peak at 84% overvalued. The area that had been 84% overvalued is now 29% UNDERVALUED. The days of most areas being overvalued is gone. This is a good sign for the slowing of the dip in home sales.
There are still many area’s that are overvalued, but only one area goes above the 30% mark. That city is Atlantic City NJ, which checks in at 30.2% overvalued. Between 20% and 28.9% other overvalued cities are: Wenatchee, Wash; Ocean City, NJ; Longview, Wash; Honolulu, Hi; Asheville, NC; Portland. Ore and finally at 20% Bellingham, Wash.
♦ America’s most undervalued cities
Then we come to the cities that have hopefully seen the last of housing market drops. These cites are all currently undervalued. There is no assurance they will not drop more, but things certainly do look promising in these areas for an economic turnaround for the housing market.
These areas include (from most undervalued at 41% to least undervalued at 31%): Las Vegas, Nev; Vero Beach, FL; Merced, Calif; Cape Coral, Fl; Houma, La.; Port St. Lucie, FL; Warren, Mich, Vallejo, Calif, Modesto, Calif; Stockton, Calif. All of these cities were OVERVALUED in 2006 from between 15% to 77% with one exception: Houma, La was 1% undervalued in 2006 and is now 34.6% undervalued.
These signs are by no means a forecast of the end of housing prices dropping, but they are certainly positive indicators that the prices COULD be approaching their historic lows.