Overvaluation persisted in some areas although declining sharply. In the fourth quarter, 21 metro areas were seen as overvalued, down from the peak of 58 in 2006. Those 21 metro areas represent 4% of the nation's housing units, compared with 20% in 2006. Areas that remained stubbornly overvalued include Bend and Portland Oregon, Miami, Florida, Honolulu, Hawaii, and Riverside-San Bernardino, California.
California and Florida, which had experienced the greatest incidence of overvaluation in recent years, and Michigan, which has been hit hard by the slumping economy in the "Rust Belt," accounted for 43 of the 50 largest price declines in the period. Other areas in the "Bottom 50" include Phoenix, Las Vegas and Washington, D.C.
Eight metro areas - seven in California and one in Florida – have seen home prices contract by more than 20% over the course of the market correction. In all, 47 metro areas, all from four states – California, Florida, Michigan and Nevada - have seen double digit declines. However, 29 metro areas, widely dispersed throughout the country, experienced price resilience. Price appreciation fell generally into two categories: undervalued or fairly valued markets, such as those in parts of Texas, the Midwest and the Northeast at some distance from the Boston- Washington, D.C. corridor; and metro areas in the Northwest in locations of robust economic activity that seem to be the remaining pockets of market froth and at risk of price declines in the future.
James Diffley, Group Managing Director of Global Insight's Regional Services Group, said, "Overvaluation is being dissipated quickly across U.S. metropolitan areas, though tight credit market conditions will continue to hamper real estate markets throughout 2008." Jeannine Cataldi, Senior Economist and Manager of the Global Insight Regional Real Estate Service, added that, "Along with the tighter credit market, weakness in overall economic conditions will keep housing below historical trends for the near future."
