In all, 80 of the 330 metro areas in the analysis experienced price declines from the first quarter. Those 80 metro areas account for 22% of the nation's single-family housing units. On a year-over-year basis, 93 metro areas had lower prices in the second quarter. More than half of them were in California, Florida, and Michigan. Price declines have been most sharply felt in those metro areas that have been among the most overvalued. Indeed, 66 metro areas had lower home prices this spring than at the end of 2005. The largest corrections occurred in California metros, led by Santa Barbara, down 12.6%. In the first six months of 2007, Merced, CA has seen the sharpest decline (-6.4%), followed by declines through much of Florida: Punta Gorda (-6.2%), Vero Beach (-5.9%), Port St. Lucie (-5.4%), and Sarasota (-5.2%).
As a result of price declines or stagnation, the overall number of single- family housing units deemed to be overvalued fell from 16% in the first quarter to 14%. Meanwhile, in terms of single-family asset value, the percent deemed to be overvalued fell to 25% from 28% (revised) in the prior quarter. At their peak one year ago, extremely overvalued metro areas were 22% of all single-family units and 44% of all related real estate asset value.
Markets identified in the study as overvalued decreased to 51 metro areas in the first quarter, down from 59 metro area markets (revised) in fourth- quarter 2006. A year ago, 79 markets were overvalued. The analysis shows that extreme overvaluation remains largely a coastal phenomenon-every state on the West Coast, as well as Nevada, Utah, Arizona, and New Mexico; Florida and the Washington, D.C. to Boston corridor on the East Coast. The most overvalued markets are Madera (70.9%) and Merced (69.4%), CA; the most undervalued markets continued to be Dallas (25.0%) and Houston (24.4%).
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, 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."
