After years of local home markets getting more and more overvalued, the trend has reversed, according to an analyis published this week.
Each quarter, Local Market Monitor, which provides research to the real estate industry, assesses 100 markets, comparing selling prices to “equilibrium” values. Company president Ingo Winzer bases those values on local economic and population growth, construction costs, vacancy rates, household income in the area and interest rates.
The number of overpriced markets in the first quarter, defined as having a median home price more than 15 percent higher than equilibrium, fell by two to 38. In the prior quarter, the number of overvalued markets had climbed to 40 from 37.
Winzer says that 56 of the 100 markets he covers are now fairly priced, up from 54 last quarter.
The median home, however, is still overpriced by an average of more than 14 percent, Winzer judges, and homes in many markets are still way too high. This matters because those markets have much more potential for the kind of steep decline that could be disastrous for homeowners – and the local economy.
City/Actual Price/Equilibrium Price/Difference/Rating
Atlantic City NJ $262.9 $186.6 41% Overpriced
New York-North New Jersey NY $431.0 $300.5 43% Overpriced
Philadelphia PA $247.2 $217.9 13% FairValue
Hartford CT $237.2 $224.2 6% FairValue