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EXTREME OVERVALUATION IN HOUSING MARKET BECOMES MORE PERVASIVE DURING SECOND QUARTER
Global Insight/National City Housing Valuation Analysis of Top 299 Metro Areas Sees Increase in At-Risk Markets
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WALTHAM, MA, CLEVELAND-October 13, 2005-The second-quarter update of the Global Insight/National City Housing Valuation Analysis released today shows the single-family housing market became more overvalued from the first quarter. Fifty-six of the 299 metropolitan areas studied, accounting for 32 percent of the total single-family housing market, were identified as being at risk of future price declines. This represents a slight increase from 53 metropolitan areas (31 percent of the single-family market) during the first quarter.
"Evidence of bubblettes clearly continues to build," said Richard DeKaser, chief economist at National City Corporation (NYSE: NCC), "though frothy conditions still account for a minority of the overall housing market."
The net addition of three metropolitan areas to the list of extremely overvalued markets includes five new listings and two areas that have been dropped. New to the list are Fort Walton Beach, Fla.; Portland and Eugene, Ore.; Edison, N.J. and Bethesda, Md. Except for Fort Walton Beach, where prices advanced at a 6.9 percent annual pace during the quarter, each area among the five new listings posted increases between 21 and 29 percent. The two metro areas that fell off the list of extremely overvalued markets are Boston and Essex, each located in eastern Massachusetts. While prices there continued to rise at a healthy clip, improving fundamentals, such as income and population gains, helped reduce the imbalance.
"We're not surprised by the emergence of extreme overvaluation in what are clearly hot spots for the housing market," stated Philip Hopkins, managing director of U.S. Regional Services at Global Insight. "And the Boston area adjustment illustrates the possibility for orderly corrections, rather than inevitable crashes. Outside the hottest housing markets, some signs of a slowdown in the rate of price growth were evident. The average level of overvaluation declined from 22.7 percent to 19.9 percent, with 171 of the 299 metropolitan areas analyzed showing a decrease in the extent of overvaluation between the first and second quarters."
The Global Insight/National City Housing Valuation Analysis examines the top 299 U.S. real estate markets to determine what home prices should be, controlling for differences in population density, relative income levels, interest rates, and historically observed market premiums or discounts. Markets with valuation premiums above 30 percent were deemed at risk for price corrections based on the typical degree of overvaluation that preceded the 63 known local market price declines observed since 1985.
The Global Insight/National City Housing Valuation Analysis is a joint venture that combines a statistical model originally developed at National City Corporation with data largely developed at Global Insight. More information is available at www.globalinsight.com/housingindex or www.nationalcity.com/economics.
National City Contact:
Tom Tennant
National City Media Relations
216-222-2855
Thomas.Tennant@NationalCity.com
Global Insight Contact:
Jeannine Cataldi
Senior Economist, Manager of Real Estate Service, Global Insight
610-490-2650
jeannine.cataldi@globalinsight.com
Jim Dorsey
Global Insight Media Relations
781-301-9069
jim.dorsey@globalinsight.com
About National City Corporation
National City Corporation (NYSE: NCC), headquartered in Cleveland, Ohio, is one of the nation's largest financial holding companies. The company operates through an extensive banking network primarily in Ohio, Illinois, Indiana, Kentucky, Michigan, Missouri and Pennsylvania, and also serves customers in selected markets nationally. Its core businesses include commercial and retail banking, mortgage financing and servicing, consumer finance and asset management. For more information about National City, visit the company's Web site at www.NationalCity.com.
About Global Insight
Global Insight, Inc. (http://www.globalinsight.com/) is a privately held company formed to bring together the two most respected economic analysis, forecasting and financial information companies in the world, DRI and WEFA. Global Insight provides the most comprehensive economic coverage of countries, regions and industries available, using a unique combination of expertise, models, data and software within a common analytical framework to support planning and decision-making. Global Insight collects and delivers economic and financial information to clients and also provides a broad range of consulting capabilities. With its April 2003 acquisition of World Markets Research Centre, Global Insight also provides the world's first same-day analysis and risk assessment service covering 196 countries and 4 industries, providing insightful analysis of market conditions and key events around the world. The company has over 3,800 client organizations in industry, finance and government with revenues in excess of $80 million, over 600 employees and 23 offices in 12 countries covering North and South America, Europe, Africa, the Middle East and Asia.
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