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U.S. housing up cycle still has some legs, Fitch says

The upswing in the U.S. housing market still hasn’t run its course, according to analysts from Fitch.

Home prices, on a national basis, are still within a stable range and several factors favor increased homeownership and levels of home building over the next couple of years, analysts said during a webcast this week. There are, however, some concerns.

Home prices in several states, particularly the West region, are overvalued, Fitch analysts said.

“Much of the West currently looks overpriced to us,” said Grant Bailey, head of Fitch’s U.S. RMBS group. “We think the strong momentum of the housing recovery over the last couple of years has overshot those areas. They are becoming increasingly vulnerable to a sharp slowdown or even another correction in some places.”

On a national basis, the current price of homes is “sustainable” when incomes, employment levels, the number of households, the cost of rent and the current mortgage rates are factored.

Home prices in Florida, Texas, Arizona, Nevada, California, Oregon, Idaho and North Dakota are “overvalued” by as much as 2 percent, Fitch said. Prices in Hawaii are even more highly overvalued.

Bailey said that North Dakota, in particular, could feel a correction because of the state’s heavy dependence on oil drilling. He also said that home prices in several states in the Northeast are below their long-run sustainable levels. Many states in the Northeast, including New York, have larger inventories of distressed properties left over from the downturn, which have kept average home prices down. These states typically are judicial foreclosure states with longer timelines to complete foreclosures. 


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