Another Top-10 List — Over and Undervalued Housing Markets

In the past week I wrote about the strong robust economy in Portland, Oregon, and how that, given limited new residential construction, home prices in Portland, in my opinion, were at a premium today given historical price levels.

Then I came across a study from Trulia that specifically examined current valuations with respect to historical norms. Trulia analyzed the 100 largest metropolitan markets and found that, overall, home values are still 3 percent less than normal. Within the 100 markets, however, Trulia identified 76 as undervalued and just seven as overvalued by more than 10 percent.

By the way, Trulia did not classify Portland Oregon as an overvalued housing market — at least overvalued 10 percent or more. But they did deem it as 6 percent overvalued. At 6 percent overvalued, it essentially tied with the 10th most overvalued market in the country, San Francisco. So my conclusion is supported on Portland housing values. Phew.

All but two of the top-ten markets so designated as overvalued are located in California. California has a major constraint on new residential lot availability (development and entitle approvals often take a decade or more) and also massive impact fees on new developments. Hence the strong pricing of existing California properties.

So what are the most overvalued markets according to Trulia? And the most undervalued?

7-1-14 table

Not one of the most undervalued markets is West of the Mississippi. And all but two, Lakeland-Winter Haven and Memphis, are located in the North.

To read the Trulia Bubble-Watch Blog article and download the entire list of the 100 largest markets click http://www.trulia.com/trends/2014/06/bubble-watch-q2-2014/

Once gain note the incredible speed at which housing markets have recovered. But that is purely a function of jobs, and the supply (or lack) of new housing.

It’s better than you think out there.

Ted

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