According to a study by Global Insight/National City, San Francisco has gone from being “fairly valued” in 2001 (well okay, 4.8% overvalued) to being overvalued by 40.8% in 2006. This degree of a rise in housing price valuation over the course of five years has raised many concerns. Many commentators would argue that home prices have spiked much faster in San Fransisco than much of the rest of the nation and that the question of affordability for the average person is earning a more bleak answer by the day. Others counter this by citing other sources, still understanding that the prices are rising but that the rate is nothing compared to other parts of the United States.

Interestingly enough, that doesn’t even put us in the “Top 50” of “over-valued” metro areas (Naples, Florida leads the nation at 102.6%). And it’s nothing we haven’t heard before. Still, the fact that the trend is veering upwards will spell good news for those who already owned property in these areas, but are concerning for those looking to enter into these markets with the price heading ever upwards.

One new twist, however, is that based on a “historical examination of 66 actual metro area price corrections” (including a drop of 11% in San Francisco from 1990-1994), the study suggests that when/if “prices do fall from overvalued levels, they typically fall by about half the overvaluation” but that a “correction usually takes three and a half years.” This means there’s plenty of time for people to be made the winners and losers of this valuation competition, and plenty of time to see who will stay in the area and who will choose, or be forced, to leave.
? Global Insight/National City Study: House Prices in America – pdf [globalinsight.com]
? More housing markets overvalued [MarketWatch]

One thought on “Bottoming Out In 2009?”
  1. OK, a drop of 11% from 1990-1994 — did everyone forget what caused that drop? Remember that big earthquake in October 1989?

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