Economist says Home Prices Have Risen to "Extremely Overvalued" Levels in 53 Cities

WASHINGTON – The chief economist of National City Corp., has examined 299 metro areas that make up 80% of the U.S. housing market and determined that single-family home prices are "extremely overvalued" in 53 cities that make up nearly a third of the total U.S. housing market. The findings, says Richard DeKaser, puts these cities at high risk of price declines. He determined a market to be extremely overvalued if prices are 30% above where DeKaser estimates they should be based on historic price data, area income, mortgage rates, and population density. In 85% of the cities surveyed, the economist said home-price gains outpaced income gains during the past year. Based on those factors, the highest-risk markets are in California (25 out of 53 listed cities); Southern Florida (10 cities); parts of the Boston area; Nassau and Suffolk counties, Long Island, N.Y,; and Ocean City, N.J. The 53 metropolitan areas DeKaser found to be the most vulnerable to price corrections in the future include: -