Monday, May 28, 2007

Housing Problems Predicted in Mid-2005

I recently cleaned up a number of paper files over the weekend and I found an interesting one from August 2005. In a USA Today article National City identified 53 cities as being overvalued.

. . . . Single-family home prices are "extremely overvalued" in 53 cities that make up nearly a third of the overall U.S. housing market, putting them at high risk of price declines, . . . .

. . . . DeKaser terms a market extremely overvalued if prices are 30% above where he estimates they should be based on historic price data, area income, mortgage rates and population density — a proxy for land scarcity. . . .

At the time DeKaser did not know what would trigger a market decline, but he knew one was coming.

A article indicated that a number of mortgage insurance companies did a similar type of analysis where they identified a number of cities as having a real estate bubble.

The point of these analyses are that a number of firms appreciated the housing bubble and they knew it would not last forever.

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