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Home prices 'overvalued' in a third of U.S. markets


Homes are now overvalued in more than a third of the nation’s 100 largest metros and nearly half of the country’s top 50 markets, CoreLogic reported.

As of July, home prices in 34 percent of the top 100 cities exceeded their long-run level, the company said. In the top 50 markets, 46 percent were overvalued. In these cities, the prices have risen by 10 percent or more above a level thought to be sustainable by incomes and other market fundamentals, CoreLogic said.

homepricesovervalued"The combination of steadily rising purchase demand along with very tight inventory of unsold homes should keep upward pressure on home prices for the remainder of this year,” said Frank Martell, president of CoreLogic in a news release.

“While mortgage interest rates remain low, affordability cracks are emerging as over a third of U.S. top cities are now overvalued," he continued.

Home prices were up by 6.7 percent year over year in July, and rose 0.9 percent from the June level, the company said. Prices rose at the fastest pace in the Pacific Northwest and the mountain states, the company said.

Other commonly cited indices suggest that the nominal price of homes reached a peak on a nationwide basis several months ago. Black Knight Financial Services and Case Shiller’s home price indices hit new peaks in June. The National Association of Realtors reported that the median national home price hit a new record high at $255,600 in the second quarter.

There is much disagreement among economists about affordability, however. The title insurance company, First American Corp., has asserted that real home prices remain affordable in all major markets, and the real prices of the overall market remains below that of homes in 2000, which is often cited as a normal year.

First American, however, says that real prices, which factor changes in incomes and mortgage rates along with the nominal price change, had risen by 10 percent year over year as of May. Most economists believe that prices will continue to rise and further erode affordability as buyers compete for  limited inventories for sale.  


 

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