Yesterday, we learned that the NAHB Housing Market Index, a gauge of home-builder confidence, declined to its lowest reading since the 1991 recession:
Source: NAHB, Wells Fargo
Given the high inventory still around, its no surprise that all three components of index dropped: Single-family Home Sales fell to 29 (from 31); Traffic of Prospective Buyers droped to 21 from 22; Expected Sales for the next Six Months declined to 39 from 41.
The last time the HMI was this low was in the throes of the 1990-91 recession.
Rather than spend much time on this well-covered report, I want to draw your attention to a little followed report on Home Valuation. I stumbled across this extremely informative analysis, filled with great
info-porn maps (below) from Global Insight and National City
It looks at the regions of the country which have had the greatest home price appreciation and, by their measures, are the most overvalued.
First the good news: less homes are overvalued today than in 2005, when the study found
45% of all homes 23% of homes were overvalued by 45%.
Today, 14% of homes for sale are still overvalued — but by only 25%:
The following shows where the overvalued/undervalued homes are located:
That decrease in overvaluation comes as no surprise: The huge overhang of inventory = price decreases (see below).
Thus, many of the over-valued regions are becoming a little less overvalued.
But, depsite the hopes of the bottom-callers, there is still a ways to go.
Full Study: House Prices in America – Q1 2007
A Global Insight / National City Corporation, June 2007
2006 Q1 PDF: http://www.globalinsight.com/gcpath/1Q2006report.pdf
additional graphs, and a summary of the report, after the jump
The report also notes that price declines took place in about half of the
317 markets: "Declines were widely dispersed, though most highly
concentrated in California, Florida, New York, New England, and the
Here is the report’s summary:
• One hundred fifty-seven of 317 metro areas suffered price declines during the last quarter. Cumulatively, these 157 metro areas accounted for 38 percent of all single-family units and half of all single-family real estate assets in the nation. Declines were widely dispersed, though most highly concentrated in California, Florida, New York, New England, and the industrial Midwest.
• Nationally, however, house prices advanced during the first quarter at an annualized rate of just 2.2%. This latest gain falls between the third quarter pace of 2.0 percent and the fourth quarter pace of 2.5%. On a year-over-year basis, prices are up 3.0 percent, the weakest gain in a decade.
• Fifty-four metro areas were judged to be overvalued during the quarter, representing a decline from 62 metro areas (as revised) during the third quarter More important were declines in the share of all housing units, and real estate assets, judged to be overvalued. In terms of housing units, the percent deemed to be overvalued declined from 17 to 14 percent (as revised). In terms of single-family asset value, the percent deemed to be overvalued declined from 33 to 25 percent (as revised). Clearly, we interpret the evidence as reflective of prices reverting to their historic norms, though further adjustment is likely.
• House prices have been resilient in the interior West, though we see overvaluation there increasing, making those gains precarious. Bend, Oregon and Prescott, Arizona are now the nation’s most overvalued markets. Alternatively, price gains in Texas seem more firmly based, as valuations there are attractive by historical standards.