The Charlotte Observer – 10.22.2005
This article highlights a study conducted by PMI, the mortgage insurer and their recent findings on valuing property. Their index tracks a home’s historical price appreciation values and how current home values are deviating from the norm.
It turns out that several dozen cities are overvalued according to PMI's valuation method. In fact, some areas are dramatically overvalued. Los Angeles, for example, is overvalued by nearly 34% according to the study. Las Vegas is 26% overvalued. San Diego homes are overpriced by 22%. San Jose is overvalued by 27% and Miami is overpriced by nearly 20%.
The article goes on to quantify the risk of a dramatic housing decline in certain communities. Los Angeles has a 46% probability of a significant market decline in the next 24 months while San Diego and Boston have nearly a 60% chance of decline.
The article’s advice mirrors what we have been saying. For buyers, push hard for price concessions as you may be buying at the end of the appreciation cycle and could end up with a house worth less than what you paid for it. For sellers, you may not be able to sell for the price you thought you and the price is likely to go down from here. If you want to sell, price your home reasonably to avoid larger price cuts later to move the property.