Posts filed under “Real Estate”

Riskiest Housing Markets? (PMI Market Risk Index)

Interesting (if understated) article in WSJ yesterday about the PMI U.S. Market Risk Index report; The PMI Index suggested that about "half of the 50 markets are overvalued by 10% or more, the
report said. Only 11 markets are undervalued."

Recall that I have been saying that Housing is an extended asset class, and not a bubble. That makes overvalued regions vulnerable to a pullback, as opposed to a full blown crash.

Here’s the Ubiq-cerpt:™

Home prices in some of the nation’s largest markets are poised
for a fall, according to a study that says homes are overvalued in many

The PMI U.S. Market Risk Index report, released yesterday, named
Boston, San Diego, Long Island, N.Y., Santa Ana, Calif., and Oakland, Calif., as
the markets facing the biggest risk of a price correction. The index showed
these markets have a more than 50% chance of experiencing price declines during
the next two years. New York City ranked 14th, with a 33% chance . . .

The markets facing the biggest potential correction are Los
Angeles, Sacramento and Riverside, Calif., where prices are estimated to be
overvalued by 33.7%, 31.3% and 30.7% respectively, the report said. New York
City’s prices are 16.3% overvalued, according to PMI.

Here’s the methodology behind their calculations:

PMI calculated its Risk Index by tracking and comparing
home-price appreciation, labor markets, employment levels, affordability and the
percentage of monthly income that a mortgage takes up in each market. The Risk
Index estimates the chances of a price correction of any size in the next two

The Valuation Index, which the firm just introduced, is based on
home-price appreciation, the cost of a 30-year fixed-rate mortgage and the
public demand for housing in each market. This index offers a snapshot of how
much a home is overpriced or undervalued in each market at this moment.

click for larger table


Home Prices Might Fall Soon
October 19, 2005; Page D3

Category: Real Estate

Inflation’s Demise Has Been Exaggerated

Category: Economy, Inflation, Investing, Real Estate

Chart of the Week: Actual Housing Costs (w/o BLS Adjustments

Category: Economy, Inflation, Real Estate

Back Out Housing Adjustments, and Core CPI = 5.3%

Category: Economy, Inflation, Real Estate

Chart of the Week: Bloomberg REIT Index

Category: Investing, Real Estate

Insolvency Epidemic

Category: Economy, Real Estate

Polling Homeowners (they do not have a clue)

Category: Economy, Real Estate

Manufacturing versus Real Estate

Category: Economy, Real Estate

Housing Market Gives Cooling Sign

Category: Economy, Financial Press, Real Estate

Global Investors Gobble Up Mortgage-Backed Securities

Category: Financial Press, Real Estate