Study Finds Houses 'Extremely Overvalued'

Single-family houses are "extremely overvalued" says this study. No. Really?! You don't say? Could have fooled me (but apparently not this person). Not here though; Marin is special.

Some choice quotes:

"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, according to a study released today."

"The report, by Richard DeKaser, chief economist of National City Corp., examined 299 metro areas accounting for 80% of the U.S. housing market."

"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."

"Based on those criteria, Santa Barbara, Calif., is the nation's most out-of-whack market, with houses 69% overpriced. Rounding out the top five: Salinas, Calif.; Naples, Fla.; and Riverside and Merced, Calif."

"The highest-risk markets are in California; Southern Florida; parts of the Boston area; the Long Island, N.Y., counties of Nassau and Suffolk; and Ocean City, N.J."

"The big culprit: in 85% of the cities surveyed, home-price gains outpaced income gains during the past year. In Bakersfield, Calif., prices rose 33% while incomes increased 3%. In 29% of areas, prices outpaced income growth by at least 10 percentage points."

"Just 2% of markets were in bubbly territory at the start of 2004, vs. 31% in the first quarter of 2005."

""For the U.S. as a whole, I expect we're going to have an orderly correction. But that doesn't mean it's going to be equally orderly in all places," DeKaser says."