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From Overheated to Simply Over: New Data on the Hottest U.S. Housing Markets
7 Sep 06
New data reveal significant declines in both home price appreciation and home sales among the nation's housing markets.
In the joint Global Insight/National City housing valuation study for first-quarter 2006, 71 metro areas were found to be extremely overvalued in terms of home prices. By that quarter, home price appreciation in most of those metros had finally begun to decline—but how low would they go? New data released by the Office of Federal Housing Enterprise Oversight (OFHEO) reveal that price appreciation is now nearly at a standstill in almost all of the top 20 markets, and in some, prices are actually declining. The table shows home price appreciation on a quarter-to-quarter basis for the top 20 markets, as reported by OFHEO. Ten of these markets posted a decline in quarter-to-quarter appreciation of 6.5 percentage points or more between second-quarter 2005 and second-quarter 2006, with Naples—the most overvalued—also showing the largest decline, at 11.72 percentage points. In four of these markets, prices are now falling. Top 20 Most Overvalued Markets, from First-Quarter 2006 National City/Global Insight Study | (OFHEO home price appreciation, quarter-to-quarter percent change) | | | 2005Q2 | 2006Q2 | | | | 2005Q2 | 2006Q2 | 1 | Naples, FL | 12.65 | 0.93 | | 11 | Modesto, CA | 8.46 | 0.10 | 2 | Salinas, CA | 4.96 | 1.02 | | 12 | Redding, CA | 6.33 | -0.69 | 3 | Port St. Lucie, FL | 7.43 | -0.42 | | 13 | Yuba City, CA | 7.38 | 0.30 | 4 | Merced, CA | 8.85 | 1.05 | | 14 | Medford, OR | 7.32 | 2.11 | 5 | Bend, OR | 6.01 | 7.37 | | 15 | West Palm Beach, FL | 8.12 | 1.27 | 6 | Stockton, CA | 7.55 | 0.16 | | 16 | Napa, CA | 3.54 | -0.93 | 7 | Punta Gorda, FL | 7.88 | -0.19 | | 17 | Sarasota, FL | 8.31 | 1.75 | 8 | Santa Barbara, CA | 4.95 | 0.72 | | 18 | Miami, FL | 7.67 | 4.72 | 9 | Madera, CA | 4.67 | 3.27 | | 19 | Atlantic City, NJ | 7.92 | 2.61 | 10 | Riverside, CA | 5.11 | 1.75 | | 20 | Fresno, CA | 6.50 | 0.93 |
The majority of the overvalued markets can be found in Florida and California. Home sales in both these states are on the decline, and were down by 26.8% in Florida and 25.3% in California, year-on-year (y/y) during the second quarter of 2006. Unsurprisingly, these declines are concentrated in the most overvalued metro markets: in Naples, FL, second-quarter sales were down by 44% y/y; in Salinas, CA, July 2006 sales were down 50% y/y. The one metro area bucking the trend is Bend, OR, which is a booming second-home and vacation-home market—prices there are climbing at a faster rate now than one year earlier. In fact, Bend's home price appreciation in second-quarter 2006 was tops among all the 275 metro areas ranked by OFHEO. Home sales there also showed the smallest year-to-date decline (through second-quarter 2006) among the top 20 markets, down 8%. Overall, however, the nation's hottest housing markets have finally stopped boiling. by Jim Diffley and Jeannine Cataldi
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