Nearly One-Third of Home Markets Still Overpriced

By:: Kara Johnson | February 03, 2010

Nearly one-third of U.S. housing markets remain overvalued, despite nearly four years of falling prices that have seen U.S. homes lose nearly 30 percent of their value.

New figures released by IHS Global Insight and PNC Financial Services on home values in 299 U.S. cities concluded that 88 of them remain overvalued, though to a much lesser extent than in previous years. By contrast, over two-thirds of all communities were regarded as undervalued, with some of the softest pricing in communities that were regarded as among the most overpriced at the top of the market in 2006.

Most of the currently overvalued communities tend to be clustered in the Northwest or along the East Coast. Atlantic City, N.J., was rated as most overvalued, with a median home price of $232,100 regarded as 30 percent overvalued. Other notable overpriced markets included Portland, Ore., regarded as 21 percent overvalued, and Spokane, Wash., overvalued by nearly 15 percent.

By contrast, Naples, Fla., was regarded the nation’s most overpriced market in 2006, with home prices deemed 84 percent overvalued at that time. The Naples market is currently regarded as 29 percent undervalued.

For the most part, the 88 markets regarded as overvalued were only modestly overpriced, with only 24 deemed overvalued by 10 percent or more. By contrast, 43 communities were deemed undervalued by 20 percent or more.

Las Vegas, Nev., was regarded as the most undervalued, with a median home price of $129,700, deemed undervalued by 41 percent. The city has experienced the nation’s sharpest declines in home values over the past four years, with home values less than half of what they were at the top of the market, according to tracking data from Standard & Poor’s/Case-Shiller. At the top of the market, it was overpriced by 38 percent, according to IHS Global Insight

The study evaluated communities based on median home prices, income, population density and prevailing mortgage interest rates, among other factors, to determine which areas were overpriced or underpriced.

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