Forty-two percent of the top 299 metro housing markets in the United States are “extremely overvalued and at risk for a price correction,” according to the fourth-quarter update of an ongoing statistical analysis conducted by Global Insight, a Boston-based economic research firm, and National City, a Cleveland-based financial services firm."While the incidence of overvaluation clearly increased, we are beginning to see the pace of price appreciation slowing, with the lowest increase since the third quarter of 2003," Richard DeKaser, chief economist at National City, said in a release. "However, despite higher mortgage rates and waning demand, continued strong price appreciation has pushed affordability to its lowest point since 1991 and excessive valuations continue to spread."
"Price increases continued to slow down, as they did in the third quarter, which suggests that a return to more normal valuations may lie ahead," added Philip Hopkins, managing director of U.S. Regional Services at Global Insight.
California and Florida had the highest concentration of overvalued markets, accounting for 18 of the 20 most overvalued metro areas, the firms reported. Arizona, Idaho and Utah also saw substantial valuation increases.
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