By: Lauren Rockwell, a business writer and works on the marketing staff at Liberty Capital Group, Inc. She writes about the latest business trends and industry conditions, from international economics to business funding and financing.
We could all use an update on the U.S. housing market, right? It has had its fair share of ups and downs over the past decade. Fortunately, it seems to be picking up again. According to real estate market reports released within the past three months, the U.S. housing market is ramping up, and showing signs of growth as early as June 2013. Local newspapers all over the country are reporting on their cities, both large and small, saying the housing market is beginning to pick up from its long halt. A news reporter for a local ABC News station in Dallas, Texas said that homebuyers and realtors alike reported an increasingly crowded housing market. Reporter, Shelly Slater of ABC Dallas jokes, “Sellers are loving the market these days –– that is until they become the buyer.”
Overvalued and Undervalued Markets
Fitch Ratings, a global rating agency that reports on research and data for investors and other economic purposes, recently conducted a study that ranks cities in the U.S. housing market as overvalued or undervalued. Fitch Ratings measures markets based on certain criteria. They compare home price trends against fundamental factors in the local market. These include, income growth, unemployment rates, population growth, mortgage rates, prices of rentals, and buyer demand of real estate along with inventory levels.
The company explains overvalued and undervalued housing markets like this, “If home prices grow faster than the rest of the local economy, then housing is becoming overvalued; if homes are trading for prices lower than the local economy can sustain, then housing is undervalued.” After analyzing the markets, they came up with a list of the most overvalued and undervalued homes in the U.S. Markets that are considered to be overvalued are markets in which home prices are at least 15% higher than what the local economy can currently sustain. Likewise, the markets that were categorized as undervalued, had homes whose prices were at least 10% lower than the local economic conditions. And for the list, beginning with the most overvalued markets: San Diego, CA, Washington, D.C., Los Angeles, CA, San Francisco, CA, & San Jose, CA. The most undervalued markets were: Las Vegas, NV, Chicago, IL, Atlanta, GA, Detroit, MI, & Orlando, FL, (Forbes, June 2013).
As the U.S. housing market continues to find stability, it is predicted that the U.S. hasn’t reached the end of the foreclosure era quite yet. Mark Huffman, a writer for Consumer Affairs, reports on this, and says that banks could for once be on our side, “Banks appear to be controlling how quickly foreclosures come to the market, which may have prevented the market from becoming over saturated. The resulting shortage of homes for sale in many areas has caused long-dormant home builders to go back to work, constructing new homes.” But Fannie Mae’s Chief Economist Doug Duncan weighs in on this topic and says, “We expect approximately 2.1 percent growth over the course of 2013, up from the anemic pace of 1.7 percent in 2012. This is consistent but still below the economy’s potential. Our forecast calls for growth to push past 2.5 percent in 2014, boosted largely by tailwinds from the strengthening housing market.”
Most importantly, people are active, whether they are buying or selling. Data shows that first time homebuyers aren’t afraid to buy, people who already own their home are now upgrading to newer and larger homes, and investors have begun investing in real estate yet again.