Overvaluation challenges

Naples & Cape Coral climbing overvaluation index

Naples topped the Global Insight/National City home overvaluation index for Q2 05 with a 79.4% overvalued rating, up from 3rd place and a 61.9% rating in Q1 05.

Cape Coral ranked 34th nationally in Q2 05 with a 44.1% overvalued rating up from 42nd place and a 34.6% rating in Q1 05.

Global Insight’s study merges data and forecasts for home prices, home sales, housing stock, and household income—with a methodology developed by the economics department of National City Corporation examines current and expected housing prices in the 299 largest US Metropolitan areas.

Study findings indicate that 53 metropolitan areas, representing 31 percent of the total value of the US housing market, “are extremely overvalued” and face a high risk of price correction. To be considered “extremely overvalued,” markets had to have current prices exceeding the expected price by 30 percent or more, a threshold that was determined from the median degree of overvaluation that preceded 63 known local price drops over the past 20 years.

Extreme Overvaluation in Housing Market Becomes More Pervasive During Second Quarter [Global Insight]
Housing Study Table Q2.xls [Global Insight]