Thursday, September 24, 2009

Is Your Home Market Over-Valued?

In every industry, there are people that think positive and people that look at things from more of a negative point of view. Even when things are going their best and everyone involved is making money hand over fist, you always have a dedicated group of nay-sayers that are predicting doom and gloom.

A few months ago, those voices started to get louder and louder in the real estate market. The positive thinkers pointed to incredibly low mortgage rates and record sales and said everything was all right. Unfortunately, in this case, the doom and gloomers might have been on target.

A new survey shows that an increasing number of housing markets in the United States might be overvalued, and as the logic suggests, an overvalued real estate market translates into a slower real estate market.

The main culprit is rising interest rates.

The rate for fixed mortgages (30-year) is up over half a percent in the past year, and the rates on adjustable-rate mortgages is up even more.

The real estate market that was deemed to be the most overvalued was in Naples, Florida, where the study deemed to be 101.5% higher than what National City considered to be fair value.

The city of Bend, Oregon was second in the study, coming in at almost 90%.

If you’re looking for real estate markets that still have deals, head to the great state of Texas. All five of the most undervalued markets were in the Lone Star State, led by College Station (home of the Texas A&M Aggies) which was deemed to be over 22% undervalued. Dallas was second on the list at 21% undervalued.

But how do you know if your housing market is overvalued?

Chances are, if you live in California or Florida, it is. Nine of the top ten overvalued markets are in either Florida or California, with Salinas, Merced and Madera, California ranked 3, 4 and 5. Port St. Lucie, Florida is deemed to be 74% overvalued, good enough for number 6. Stockton and Santa Barbara, California take 7 and 8, while Florida takes the final two spots at 9 and 10 with Miami (70.8%) and Punta Gorda (70.2%).

While this may be a sure sign of a pending real estate slump, the best thing any potential investor can do is take a long, hard look at all available research before you decide to take a positive or negative outlook.

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