US home prices have dropped have made affordability rising. Prices have declined and are now averagely undervalued by 12.2%, according to a new report from IHS Global Insight.

The IHS’s House Prices in America study covered 330 markets where homes is 248 are under-priced. Four years ago there were only 108 markets were undervalued. The study, which focuses on the first quarter of 2009, is a joint effort by HIS Global Insight, a Lexington-based company that specializes in economic and financial analysis and forecasting, and the PNC Financial Services Group.

Jeannine Cataldi, senior economist and manager of IHS Global Insight's Regional Real Estate Service, said: "The good news is that the declines are happening as consumer confidence is rising and housing sales and starts seem to be bottoming out; the bad news is that job losses continue at high rates, housing inventories are still elevated and consumers, while becoming somewhat more confident, are still wary in the face of economic uncertainty."

The pace of annual home prices depreciation slowed down across the country during the first quarter 2009, falling at 2.2 percent compared with 12.5 percent rate of decline in the fourth quarter 2008, according to the said study covering first-quarter 2009. Nationally, house prices have fallen 10.4% below their 2007 peak.

Home prices in 199 of 330 metropolitan areas in the study have declined, down from 312 areas registering declines in the fourth quarter of 2008.

Florida, California and Nevada continue to experience the greatest declines. They are states with the highest levels of overvaluation during the housing bubble. Michigan, feeling the double whammy of the national recession and the contraction in the U.S. auto industry.

Of the metropolitan areas covered, fifty-seven had declines greater than 25 percent from their peaks and 134 had declines greater than 10 percent. However, nine metro areas – five of them in California – and the rest in Florida, Arizona and Nevada have seen prices decline by more than 50% from their peaks.

The nation's housing market, as a whole, is now slightly undervalued, a sharp contrast to 2005 when 52 metropolitan areas were seen to be extremely overvalued. Extreme overvaluation was essentially nonexistent in the first quarter, existing for the second straight quarter only in Atlantic City, NJ.

Only the Pacific Northwest, extending across a wide region through Idaho and Utah, remained overvalued.

Home prices declined by more than 10% in five metro areas and by more than 5% in 26 in the first quarter, compared with 104 declining by more than 10% and 16 by more than 5% in the previous quarter.

 

 

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House Prices in America, a joint effort by IHS Global Insight and The PNC Financial Services Group, Inc., examines the top 330 U.S. real estate markets, representing 78.1% of all existing housing units and 92% of all related real estate value to determine what house prices should be, accounting for differences in population density, relative income levels, and historically observed market premiums or discounts. Markets with valuation premiums above 35% were deemed at risk for price corrections based on the typical degree of overvaluation that preceded the 79 known local price declines observed since 1985.