CoreLogic: Nearly Half of Large Housing Markets Overvalued

CoreLogic, Irvine, Calif., said home prices rose by nearly 1 percent month over month and by 7 percent from a year ago, but warned that nearly half of U.S. housing markets are “overvalued.”

The company’s monthly Home Price Index report said home prices rose by 0.9 percent in September from August and by 7 percent from a year ago. Home prices rose in nearly every state, with only West Virginia in negative (-0.3 percent). The CoreLogic Single-Family Rent Index rose by 3 percent over the last year, less than half the rise in the national Home Price Index.

“Heading into the fall, home price growth continues to grow at a brisk pace,” said CoreLogic Chief Economist Frank Nothaft. “This appreciation reflects the low for-sale inventory that is holding back sales and pushing up prices.

CoreLogic Market Condition Indicators of the country’s 100 largest metropolitan areas based on housing stock reported 36 percent of cities have an overvalued housing stock as of September. It said 28 percent were undervalued and 36 percent were at value. When looking at only the top 50 markets based on housing stock, 48 percent were overvalued, 16 percent were undervalued and 36 percent were at value. The MCI analysis defines an overvalued housing market as one in which home prices are at least 10 percent higher than the long-term, sustainable level, while an undervalued housing market is one in which home prices are at least 10 percent below the sustainable level.

“A strengthening economy, healthy consumer balance sheets and low mortgage interest rates are supporting the continued strong demand for residential real estate,” said Frank Martell, president and CEO of CoreLogic. “While demand and home price growth is in a sweet spot, a third of metropolitan markets are overvalued and this will become more of an issue if prices continue to rise next year as we anticipate.”

The report said home prices in Las Vegas were overvalued by nearly 10 percent; Denver (8.4 percent) and Los Angeles (7.1 percent) were also rated as overvalued. It said Boston and San Francisco prices were “at value.”