Local Market Monitor is a research firm in the real-estate sector, and they’ve produced a report about the overvaluation trend. According to the firm, overvaluation is getting worse, and houses are priced above what the firm believes is the “fair value.”
According to an article by Les Christie at CNN, home prices are accelerating even though there has been a slowdown in price in some areas.
The level of over-valuation matters in three ways, according to Ingo Wenzer, president of Local Market Monitor. The higher it is, the greater the risk of it correcting; the greater the correction can be; and the longer it will take to return to present-day prices after they fall. “Once markets are overpriced by 40 percent or so, the risk is pretty high and the adjustment can take five to 10 years,” said Winzer.
The CNN article presents a table of the 100 markets tracked by the research firm. New York/Northern New Jersey, my market, is overvalued by 43 percent. I see that as a dangerous situation for buying.
My lease is up at the end of June, and there’s no way I could afford to buy a house in this area.
Updated January 16, 2010 and originally published January 23, 2006. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @flexo on Twitter and visit our Facebook page for more updates.