Monday, September 15, 2008

Northwest Remains Overvalued

National City released the second quarter 2008 report last week and once again Oregon and the rest of the Northwest remain overvalued.

Only six metro areas are judged to be overvalued during the second quarter of 2008, down from a peak of 51 metro areas in 2005…In short, the “bubble” is gone and house prices reflect a healthy balance in relation to long-term fundamentals.

The metro areas deemed to be severely overvalued are:

Atlantic City, NJ
Bend, OR
Longview, WA
Honolulu, HI
St. George, WA
Wenatchee, WA

Portland, OR

Here is a quick summary of Northwest markets and their overvalued ranking out of 330 markets.

The second chart shows the median home price for Oregon metro areas; all areas now show a downward trend.

Now that prices are falling in Oregon we can look at the decline since the market peak. Medford peaked in the second quarter of 2006 while Corvallis peaked in the third quarter of 2007 so this chart aligns their peaks at zero and compares the rate of decline since then.

The next graph shows Oregon metro valuations since the mid 80’s. Anything above zero indicates overvaluation, but doesn’t guarantee a price correction.

Finally, The National City report covers 330 metro areas and encompasses 93% of all housing units. The overvalued regions are in red while the undervalued regions are shaded gray. Things don’t look good for the Northwest.