Wells Fargo & Co. economists wrote in a note to clients last week, “The calculus of home buying and finance has changed,” summing up succinctly something that is troubling housing experts all over the country.
Housing researcher Global Insight recently released a study of U.S. housing prices that points to the magnitude of the collapse of values.
Nationwide, Global found housing values were about 10 percent undervalued, based on a model that examines interest rates, household incomes, population, and historical price patterns. That’s a modest number compared to metro areas hardest hit by the housing recession.
In Fort Lauderdale, Fla., Global calculated that housing prices were 24 percent undervalued as of the third quarter of 2009. Three years ago, it said the area was 44 percent overvalued. Global calculates that Las Vegas is now undervalued by 41 percent compared to being 33 percent overvalued in 2006.
The trillion-dollar question is: When will things turn around? As long as there is high unemployment and tight credit, many experts believe it won’t be anytime soon.
Source: Reuters News, Emily Kaiser (12/20/2009)