The second-quarter update of the Global Insight/National City Housing Valuation Analysis released today shows the single-family housing market became more overvalued from the first quarter in general and identified specific metropolitan areas.
The study, which combined data and forecasts for home prices, home sales, housing stock, and household income—with a methodology developed by the economics department of National City Corporation examines current and expected housing prices in the 299 largest US Metropolitan areas.
Study findings indicate that 53 metropolitan areas, representing 31 percent of the total value of the US housing market, "are extremely overvalued" and face a high risk of price correction. To be considered "extremely overvalued," markets had to have current prices exceeding the expected price by 30 percent or more, a threshold that was determined from the median degree of overvaluation that preceded 63 known local price drops over the past 20 years.
The full study is available at no cost from National City Corp. and Global Insight. More information is available at http://www.globalinsight.com/housingindex or http://www.nationalcity.com/economics
Those involved with the study were not surprised by the emergence of extreme overvaluation in what are clearly hot spots for the housing market, and the study confirms that orderly corrections, rather than inevitable crashes are the normal results of these area conditions.
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