Dennis Norman Musings

Dennis Norman

By: Dennis Norman

According to a report issued by IHS Global Insight,  house prices in the first quarter of 2009 declined in 199 of the 330 metro markets they monitor.  At just over 60% of the metros this represents a huge decrease from 4th quarter 2008 when 312, or almost 95% of the metros, showed declining prices.

For first quarter 2009 the price decline nationally was 2.2%, annualized, compared with an annualized decline of 12.5% for 4th quarter 2008 which once again represents a significant move in a positive direction for the market.

Another interesting, and encouraging, item in the report is their measurement of valuation and whether real estate is overvalued or undervalued.  For the first quarter 2009 the report shows that overall the real estate market is currently undervalued by 10.6% which is a significant change from the peak of the market in 4th quarter 2005 when their reports showed the market as a whole was overvalued by 24.2%.  Currently only one market, Atlantic City, New Jersey, is considered to be “extremely overvalued” coming in at 44.1% over valued.  This is a sharp contrast to 2005 when IHS Global Insight considered 52 metro areas to be extremely overvalued. 

Other metros that are overvalued by 25% or more according to the report are:

• Ocean City, NJ
• Wenatchee, WA
• Longview, WA
• Honolulu, HI
• St. George, UT

So where are the bargains?  According to the report the follow metros are the most undervalued as of first quarter 2009:

• Vero Beach, FL                              -42.5%
• Houma, LA                                      -41.4%
• Las Vegas, NV                                -40.9%
• Merced, CA                                      -40.1%
• Cape Coral-FortMeyers, FL      -39.1%
• Houston, TX                                    -36.9%
• Midland, TX                                     -34.8%
• Lafayette, LA                                   -34.4%
• Stockton, CA                                   -34.3%
• Vallejo, CA                                       -34.3%
• Killeen, TX                                       -33.7%
• Port St Lucie-Fort Pierce, FL  -33.3%
• Modesto, CA                                   -33.2%
• Naples, FL                                       -33.0% 
• Shreveport, LA                             -32.8%
• West Palm Beach, FL                  -32.1% 
• Warren, MI                                     -31.8%
• Dallas, TX                                        -31.6%

I think this report, and the underlying statistics, show and support what I have been saying for a while now, we may be finally getting close to the bottom of the real estate market.  I think we still need a little more time though to be sure.  If the numbers for 2nd quarter follow the same pattern I would be tempted to say we are there.  I do need to add one caveat: as I wrote about last week, the number of upcoming foreclosures, and their impact on the market, still concerns me but hopefully the foreclosure numbers will drop soon as well.