We hope this foreclosure suspension will provide some relief during the holidays to those experiencing financial hardships. See Market Watch article.
“Weak economic conditions and wary consumers continue to hold the housing market back,” said Jeannine Cataldi, senior economist in charge of Global Insight’s regional real estate analysis. “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.”
However, another economist said home prices are still too high in many bubble areas.
“Prices in many markets are still hugely out of line with trend levels, as measured by price-to-rent ratios,” said Dean Baker, co-director of the Center for Economic and Policy Research. “As long as house prices remain inflated, there is no way that the market can stabilize since there will continue to be a large excess supply of housing putting downward pressure on house prices.”
Baker suggested that the government order Fannie Mae to refuse to buy mortgages in areas where prices are still out of line, thus forcing prices to correct quickly. Capital should flow to cities with fairly valued homes, Baker said.
The quarterly report from Global Insight and National City Bank compares observed home prices with fundamental values based on differences in population density, relative income levels, interest rates, and historically observed market premiums or discounts.
According to the Global Insight report, only three metro areas are extremely overvalued: Atlantic City, N.J., Bend, Ore., and St. George, Utah. In 2005, 52 metro areas were deemed to be extremely overvalued.
Home prices fell more than 10% in nine metro areas in central California during the third quarter, Global Insight said. Prices in Merced, Stockton and Modesto are down more than 50% from their peak, while 26 other cities in California, Nevada and Florida are down more than 30%, they said.
I appreciate your entire data. Thank you and keep up the good work.