Chief
03-20-2007, 09:00 AM
http://seattlepi.nwsource.com/business/308223_overvalue20.html
By AUBREY COHEN
P-I REPORTER
While U.S. house prices drew closer to where they should be in the last three months of 2006, Seattle's got more overvalued, according to a new report.
The typical house in the Seattle metropolitan area was 31.7 percent overvalued in the last quarter of the year, up 6.4 percent from the prior quarter and 24.3 percent from the end of 2005, according to Monday's joint report from Global Insight, an international economic and financial information company, and National City Corp., a financial holding company headquartered in Cleveland.
The analysis determines what prices should be by accounting for differences in population density, income, interest rates and market history. It does not mean local home prices should be expected to decrease by 31.7 percent, said Jim Diffley, managing director of U.S. Regional Services for Global Insight.
A study of 63 market price declines since 1985 showed prices dropped once markets got above 35 percent overvalued, according to the report.
"You're sort of on the edge," Diffley said. "We would say you're not in the riskiest group of metro areas."
Seattle's strong economy and the fact that its prices started their recent climb later than many areas further diminish the risk, he said. "We're not forecasting a 31 percent decline by any means."
Local experts question the idea that Seattle houses are overvalued at all.
"Sure, prices have gone up, and they've gone up rapidly," said Glenn Crellin, director of the Washington Center for Real Estate Research at Washington State University. "But we're still in a situation where the market fundamentals are extraordinarily strong."
Matthew Gardner, a local land-use economist, said Seattle did not see the 100 percent to 150 percent appreciation or the overbuilding that occurred in places such as Southern California.
"We've got high incomes, we've got a job growth rate twice the rate of the country as a whole, we've got growth management," he said. "Will we see a slowdown in appreciation? Absolutely, and that's appropriate."
Randy Bannecker, a consultant housing specialist for the Seattle-King County Association of Realtors, said there just are not enough homes available to cause overvaluing.
"The overwhelming supply shortage is really what's keeping the prices where they are," he said. "It's hard to see where just kind of a run-up for run-up's sake is in play."
Seattle's overvaluation put it 65th out of the largest 317 U.S. metro areas. The report said the number of overvalued U.S. homes fell from 17 percent of all homes in the third quarter of 2006 to 16 percent in the last three months of the year. More than 64 percent of markets were overvalued.
"Nearly all markets posted a decline in the level of overvaluation, which signals that the overall housing market is beginning to trend back to more normal price growth," Jeannine Cataldi, senior economist and manager of Global Insight's Real Estate Service, said in a news release.
The report said the number of extremely overvalued markets fell from 60 in the third quarter of 2006 to 57 at the end of the year.
Extremely overvalued markets included Bellingham, Tacoma, Mount Vernon, Longview and the Portland area.
Among those with declining overvaluation was Naples, Fla., which remained first on the list despite a 4.4-percent overvaluation decline -- to 79.9 percent in the last three months of 2006. The report found prices declined in 72 metro areas, with concentrations of drops in California, Florida and New York.
AT A GLANCE
Here are some notable cities from Global Insight's report on cities with the most overvalued and undervalued houses in the last three months of 2006. Seattle's typical house cost $364,800, which was 31.7 percent overvalued, putting it 65th out of 317 metropolitan areas.
# Most overvalued: Naples, Fla., 79.9 percent overvalued, with a typical house price of $371,000.
# Most overvalued in Washington: Bellingham, which was 31st at 45 percent overvalued, with a price of $285,000.
# Other metro areas exceeding the 35-percent threshold for "extreme" overvaluation: Tacoma (38.2 percent, 47th place), Mount Vernon (36.8 percent, 50th), Longview (36.1 percent, 57th) and Portland (42.8 percent, 35th).
# Most undervalued: College Station-Bryan, Texas, was 22.5 percent undervalued, with a price of $103,900.*
# Most undervalued in Washington: None undervalued, but Kennewick was least overvalued, at 9.3 percent overvalued and a price of $146,800, in 169th place.
*New Orleans was more undervalued, but Global Insight considers that area a special case because of Hurricane Katrina.
Details: globalinsight.com
P-I reporter Aubrey Cohen can be reached at 206-448-8362 or aubreycohen@seattlepi.com.
By AUBREY COHEN
P-I REPORTER
While U.S. house prices drew closer to where they should be in the last three months of 2006, Seattle's got more overvalued, according to a new report.
The typical house in the Seattle metropolitan area was 31.7 percent overvalued in the last quarter of the year, up 6.4 percent from the prior quarter and 24.3 percent from the end of 2005, according to Monday's joint report from Global Insight, an international economic and financial information company, and National City Corp., a financial holding company headquartered in Cleveland.
The analysis determines what prices should be by accounting for differences in population density, income, interest rates and market history. It does not mean local home prices should be expected to decrease by 31.7 percent, said Jim Diffley, managing director of U.S. Regional Services for Global Insight.
A study of 63 market price declines since 1985 showed prices dropped once markets got above 35 percent overvalued, according to the report.
"You're sort of on the edge," Diffley said. "We would say you're not in the riskiest group of metro areas."
Seattle's strong economy and the fact that its prices started their recent climb later than many areas further diminish the risk, he said. "We're not forecasting a 31 percent decline by any means."
Local experts question the idea that Seattle houses are overvalued at all.
"Sure, prices have gone up, and they've gone up rapidly," said Glenn Crellin, director of the Washington Center for Real Estate Research at Washington State University. "But we're still in a situation where the market fundamentals are extraordinarily strong."
Matthew Gardner, a local land-use economist, said Seattle did not see the 100 percent to 150 percent appreciation or the overbuilding that occurred in places such as Southern California.
"We've got high incomes, we've got a job growth rate twice the rate of the country as a whole, we've got growth management," he said. "Will we see a slowdown in appreciation? Absolutely, and that's appropriate."
Randy Bannecker, a consultant housing specialist for the Seattle-King County Association of Realtors, said there just are not enough homes available to cause overvaluing.
"The overwhelming supply shortage is really what's keeping the prices where they are," he said. "It's hard to see where just kind of a run-up for run-up's sake is in play."
Seattle's overvaluation put it 65th out of the largest 317 U.S. metro areas. The report said the number of overvalued U.S. homes fell from 17 percent of all homes in the third quarter of 2006 to 16 percent in the last three months of the year. More than 64 percent of markets were overvalued.
"Nearly all markets posted a decline in the level of overvaluation, which signals that the overall housing market is beginning to trend back to more normal price growth," Jeannine Cataldi, senior economist and manager of Global Insight's Real Estate Service, said in a news release.
The report said the number of extremely overvalued markets fell from 60 in the third quarter of 2006 to 57 at the end of the year.
Extremely overvalued markets included Bellingham, Tacoma, Mount Vernon, Longview and the Portland area.
Among those with declining overvaluation was Naples, Fla., which remained first on the list despite a 4.4-percent overvaluation decline -- to 79.9 percent in the last three months of 2006. The report found prices declined in 72 metro areas, with concentrations of drops in California, Florida and New York.
AT A GLANCE
Here are some notable cities from Global Insight's report on cities with the most overvalued and undervalued houses in the last three months of 2006. Seattle's typical house cost $364,800, which was 31.7 percent overvalued, putting it 65th out of 317 metropolitan areas.
# Most overvalued: Naples, Fla., 79.9 percent overvalued, with a typical house price of $371,000.
# Most overvalued in Washington: Bellingham, which was 31st at 45 percent overvalued, with a price of $285,000.
# Other metro areas exceeding the 35-percent threshold for "extreme" overvaluation: Tacoma (38.2 percent, 47th place), Mount Vernon (36.8 percent, 50th), Longview (36.1 percent, 57th) and Portland (42.8 percent, 35th).
# Most undervalued: College Station-Bryan, Texas, was 22.5 percent undervalued, with a price of $103,900.*
# Most undervalued in Washington: None undervalued, but Kennewick was least overvalued, at 9.3 percent overvalued and a price of $146,800, in 169th place.
*New Orleans was more undervalued, but Global Insight considers that area a special case because of Hurricane Katrina.
Details: globalinsight.com
P-I reporter Aubrey Cohen can be reached at 206-448-8362 or aubreycohen@seattlepi.com.