Home prices 'extremely overvalued' in 53 cities By Sue Kirchhoff, USA TODAY
Wed Aug 17, 8:05 AM ET
Single-family home prices are "extremely overvalued" in 53 cities that make up nearly a third of the overall U.S. housing market, putting them at high risk of price declines, according to a study released today.
The report, by Richard DeKaser, chief economist of National City Corp., examined 299 metro areas accounting for 80% of the U.S. housing market.
DeKaser terms a market extremely overvalued if prices are 30% above where he estimates they should be based on historic price data, area income, mortgage rates and population density - a proxy for land scarcity.
Based on those criteria, Santa Barbara, Calif., is the nation's most out-of-whack market, with houses 69% overpriced. Rounding out the top five: Salinas, Calif.; Naples, Fla.; and Riverside and Merced, Calif.
College Station, Texas, is the most undervalued, priced 19% below where the data suggest it should be. Other inexpensive communities include El Paso, Odessa and Killeen, Texas, and Montgomery, Ala.
The highest-risk markets are in California; Southern Florida; parts of the Boston area; the Long Island, N.Y., counties of Nassau and Suffolk; and Ocean City, N.J.
The big culprit: in 85% of the cities surveyed, home-price gains outpaced income gains during the past year. In Bakersfield, Calif., prices rose 33% while incomes increased 3%. In 29% of areas, prices outpaced income growth by at least 10 percentage points.
Just 2% of markets were in bubbly territory at the start of 2004, vs. 31% in the first quarter of 2005.
Some of the most expensive areas or those with the fastest growth aren't necessarily the most overpriced, according to DeKaser's model. Pricey Honolulu, Hawaii, for example, isn't in the top 53.
DeKaser says his study doesn't mean big corrections are imminent, though he sees evidence the housing market could be at or near a crest.
"For the U.S. as a whole, I expect we're going to have an orderly correction. But that doesn't mean it's going to be equally orderly in all places," DeKaser says.
He says it's rare for property to depreciate, even in overvalued markets, without an economic shock such as rising unemployment. Price corrections might not occur at the same time, and declines in one area could be partly offset by gains elsewhere.
DeKaser's 30% threshold for overvalued markets is based on prices in 63 areas since 1985 that later had housing price declines.
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This could be downright scary if the following is accurate ...
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Greenspan’s Role in the Housing Bubble
by Mike Whitney
August 17, 2005
"(snip) The American public is presently mortgaged up to the hilt with most of their personal wealth invested in their homes and with the highest level of personal debt in any period since the Great Depression.
Not good.
Especially when we consider that the current bubble is “larger than the global stock market bubble in the late 1990s (an increase over five years of 80% of GDP) or America's stock market bubble in the late 1920s (55% of GDP).”
Or, when we consider that “over the past four years, consumer spending and residential construction have together accounted for 90% of the total growth in GDP.” (The Economist)
Or, when we consider that 2 out of every 5 jobs in America are now related to construction. One blip in the housing market and we’ll all be hawking pencils on the street corner.
Regrettably, this Greenspan-generated pyramid scheme is headed for the dumpster. The fundamentals for securing a loan have all been abandoned, putting traditionally unqualified applicants in a position to buy a home. 42% of all new home buyers cannot even come up with a few thousand dollars for a down payment. Equally disturbing is the fact that “nearly one third of all new mortgages this year call for interest-only payments (in California, it's almost half)” (NY Times)
The Fed’s “cheap money” policy has spawned a “creative financing” monster and the speculation in the housing market has grown accordingly. A full 36% of homes are bought either for investment or as second homes; “the very definition of a financial bubble.” (The Economist)
“Speculation”? Not according to Colonel Greenspan. According to him, it’s just a bit of “froth” in the market." (big snip)
" The nation now faces the end of the Greenspan epoch and the very real prospect of an economic tidal wave greater than 1929. The bubble was manufactured by Greenspan and his colleagues at the Fed to swindle millions of working-class Americans out of their life savings and to facilitate the greatest transferal of wealth in American history.
The lesson of the housing bubble is simple: whenever monetary policy is put into the hands of privately owned institutions like the Federal Reserve, those policies will invariably reflect the narrow interests of the men who own them and the members of their class.
That’s why Thomas Jefferson warned, “Banking institutions are more dangerous than standing armies.”
He undoubtedly had the Federal Reserve in mind. "



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for 200-400K. Screw that. 
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