Global Insight, the world's leading company for economic and financial analysis and forecasting, released the third quarter 2007 update of House Prices in America, the U.S. housing-valuation analysis, showing that prices for single-family homes declined for the first time since 1994, with California, Florida and Michigan accounting for the steepest losses. Prices fell at a 1% annualized rate during the quarter, though they were still up 1.8% year-over-year.

Price drops during the period were pervasive, falling in 171 of 330 metro areas in the survey. Among the 171 with quarter-to-quarter declines, 98 also recorded year-over-year declines and 18 of them saw declines of 10% or more. Nine of the metro areas were in California, and six in Florida. Michigan and Nevada were also affected. In all, prices in 48 metro areas in these four states have declined by more than 5% in the past year. The declines in California, Florida and Michigan were the most severe, accounting for all but one of the 30 worst performing metro areas in the U.S.

The steepest price declines in California in the third quarter compared to the same period in 2006 were in Merced (16.4%) and Santa Barbara (15.1%), which has now declined by 18.8% from its peak in 2005. The largest declines in Florida were in Punta Gorda (14%) and Cape Coral - Fort Myers (12%).

The price declines have reduced the number of extremely overvalued housing markets in the nation to 38 in the third quarter, compared to 63 a year ago, representing 11% of all single family homes and 21% of related real estate asset value. The most overvalued market is Bend, OR at 70%, up 1.9 percentage points from the second quarter. Bend was among 117 metro areas that saw their levels of overvaluation increase.

While price declines in all of the California metro areas have reduced their level of overvaluation, extreme overvaluation remains the norm in each of the Pacific Coast states, and remains extensive throughout Florida and in the Greater Washington, DC metropolitan area.

James Diffley, Group Managing Director of Global Insight's Regional Services Group, said, "The current housing recession, turmoil in financial markets, tightening of credit standards and the large inventory of homes for sale will continue to exert downward pressure on prices."

Jeannine Cataldi, Senior Economist and Manager of the Global Insight Regional Real Estate Service, added that, "Indeed, the price declines thus far can be seen as relatively mild given the dramatic fall in home sales. But the evidence indicates that prices are slowly reverting to their historic relationship to economic fundamentals."

The House Prices in America study, a joint effort by Global Insight and National City Corporation, examines the top 330 U.S. real estate markets, representing 92% of the national single-family housing market, to determine what home prices should be, accounting for differences in population density, relative income levels, interest rates, and historically observed market premiums or discounts. Markets with valuation premiums above 33% were deemed at risk for price corrections based on the typical degree of overvaluation that preceded the 79 known local market price declines observed since 1985.