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Least overpriced housing markets
In new rankings of market valuations, Texas cities give more home for the buck.
August 23, 2005: 2:02 PM EDT
By Les Christie, CNN/Money staff writer

NEW YORK (CNN/Money) - Attention bargain hunters! If you want to buy in the most underpriced housing markets in the country, go southwest young man.

Richard DeKaser, chief economist of financial services company National City Corporation, recently studied 299 U.S. housing markets, assigning relative valuations based on historical prices in the region, income, population density, and interest rates.

DeKaser found that six of the ten least overpriced markets were in Texas.

College Station -- where DeKaser deems prices are 19 percent below their "appropriate" value --finished dead last.

Other Texas cities in the bottom 10 include El Paso, Odessa, Killeen, and Beaumont.

Dallas was the biggest metro area (more than 5 million) among the lowest ranked cities. Its houses were judged undervalued by 11 percent.

Remain hot -- or not?

During the last several weeks many economists have weighed in on whether red-hot real estate market will retain its heat or not. DeKaser has come down firmly in the cool-down camp.

His study indicates that the crest of the wave that housing markets have surfed the last few years may have already peaked.

"Signs are emerging," he wrote in the report released today, "that the five-year boom in house sales and price appreciation may be losing its heat."

He based his conclusion on several statistical factors:

  • How far overvaluation has spread: In DeKaser's evaluation, at the onset of 2004 only two percent of the single-family home markets nation-wide were overvalued to the extent observed before past price declines. Earlier this year, 31 percent of markets were that far overvalued.
  • Extent of the overvaluation: Prices have run up so much faster than income. Of 299 metro areas DeKaser examined, 85 percent recorded price gains that exceeded income. Twenty nine percent had price increases that surpassed income gains by at least 10 percent.
  • Drop in mortgage applications: After record application filings in April, May, and June, mortgage applications have "hit a ceiling."
  • Increase in inventory: The number of homes for sale hit a 15-year high in June and the supply of new homes was at an all-time high.

Where it will hit hardest

Most of the most overvalued markets, according to DeKaser, are in California and Florida. Number one is Santa Barbara, where home prices, at a median of $564,100, are 69 percent higher than they should be.

Close behind is another Golden State city, Salinas, where home prices, at $515,231, are overvalued by 67 percent. Naples, Fla., came in third at $276,827, 62 percent higher.

The only town to crack the top 15 from outside Florida or California was Medford, Ore. The median home price there was $228,201, overvalued by 55 percent.

Of cities with populations of more than one million, San Diego was judged the most overvalued. Homes there average $443,445, according to the report, and are 53 percent higher than they should be. Los Angeles was 48 percent higher, with a median price of $405,668.

How hard it will hit

Despite what seems like rather glum number, DeKaser expressed doubt that the market as a whole would go through an explosive reversal.

"If and when such corrections occur," he wrote, "they should be restricted to the portion of the market that's precariously overvalued."

DeKaser also pointed out that corrections tend to be "slow, drawn-out affairs, taking an average of three years to play out."

He suggest it will take the form of an "orderly correction rather than a disruptive crash."

For another take on the housing price boom, click here.

If home prices are on the downswing, you can't prove it with the latest price stats. For more click here.  Top of page

Metro area % over/
under-
valued
Santa Barbara, CA +69%
Salinas, CA +67%
Naples, FL +62%
Riverside, CA +60%
Merced, CA +59%
Stockton, CA +58%
Port St. Lucie, FL +58%
Madera, CA +57%
Napa, CA +57%
Medford, OR +55%
Sacramento, CA +54%
Modesto, CA +53%
San Diego, CA +53%
Santa Rosa, CA +52%
Chico, CA +52%
Barnstable Town, MA +50%
San Luis Obispo, CA +49%
Oxnard, CA +48%
Fresno, CA +48%
Los Angeles, CA +48%
Miami, FL +46%
West Palm Beach, FL +46%
Vallejo, CA +45%
Ocean City, NJ +45%
Bend, OR +45%
Sarasota, FL +45%
Redding, CA +44%
Ft Lauderdale, FL +43%
Nassau-Suffolk, NY +42%
Santa Ana, CA +41%
Atlantic City, NJ +41%
Bakersfield, CA +40%
Oakland, CA +39%
Santa Cruz, CA +39%
Palm Bay, FL +38%
Las Vegas, NV +38%
Poughkeepsie, NY +37%
Vero Beach, FL +37%
San Jose, CA +36%
Bellingham, WA +35%
Panama City, FL +35%
Cape Coral, FL +35%
Providence, RI-MA +34%
Reno, NV +33%
Kingston, NY +32%
Visalia, CA +32%
Deltona, FL +31%
Boston, MA +31%
Washington, DC-VA-MD-WV +31%
Essex County, MA +30%
San Francisco, CA +30%
Prescott, AZ +30%
Duluth, MN-WI +30%
Portland, OR-WA +29%
Eugene, OR +29%
Worcester, MA +28%
Bay City, MI +27%
Tampa, FL +27%
Edison, NJ +27%
Bethesda, MD +27%
Minneapolis, MN-WI +27%
Grand Junction, CO +27%
Ft Walton Beach, FL +27%
Flint, MI +27%
Monroe, MI +26%
Jackson, MI +25%
Portland, ME +25%
New York, NY-NJ +25%
Asheville, NC +25%
Cambridge, MA +24%
Charlottesville, VA +24%
Greeley, CO +24%
Charleston, SC +24%
Jacksonville, FL +24%
Holland, MI +23%
Newark, NJ-PA +23%
Honolulu, HI +23%
Boulder, CO +23%
Santa Fe, NM +22%
Baltimore, MD +22%
Salem, OR +22%
Virginia Beach, VA-NC +21%
Battle Creek, MI +21%
Manchester, NH +21%
Springfield, MA +20%
Seattle, WA +20%
Detroit, MI +20%
Ocala, FL +20%
Lansing, MI +20%
Pensacola, FL +19%
Chicago, IL +19%
Savannah, GA +19%
Niles, MI +19%
Orlando, FL +19%
Rockingham, NH +19%
Brunswick, GA +19%
Gainesville, FL +18%
Wilmington, NC +18%
Tallahassee, FL +18%
Tacoma, WA +18%
Metro area % over/
under-
valued
Ann Arbor, MI +18%
Olympia, WA +18%
Warren, MI +17%
Longview, WA +17%
Casper, WY +17%
Racine, WI +17%
Bremerton, WA +17%
Phoenix, AZ +17%
Eau Claire, WI +16%
Corvallis, OR +16%
St. George, UT +16%
Flagstaff, AZ +16%
Saginaw, MI +16%
Muskegon, MI +15%
Trenton, NJ +15%
Denver, CO +15%
Mount Vernon, WA +15%
Ft Collins, CO +15%
Tucson, AZ +15%
Camden, NJ +15%
Norwich, CT +14%
Lake-Kenosha, IL-WI +14%
Richmond, VA +14%
Milwaukee, WI +13%
Anchorage, AK +13%
Grand Rapids, MI +13%
Madison, WI +13%
Michigan City, IN +12%
La Crosse, WI-MN +12%
York, PA +12%
Farmington, NM +12%
Rockford, IL +12%
Kalamazoo, MI +12%
Canton, OH +11%
Colorado Springs, CO +11%
Gainesville, GA +11%
Burlington, VT +11%
Philadelphia, PA +11%
Lakeland, FL +11%
Waterloo, IA +10%
Wilmington, DE-MD-NJ +10%
Pittsfield, MA +10%
Lynchburg, VA +10%
Dalton, GA +10%
Dubuque, IA +10%
Toledo, OH +10%
Hickory, NC +10%
Vineland, NJ +9%
Janesville, WI +9%
Roanoke, VA +9%
Peoria, IL +9%
St. Joseph, MO-KS +9%
New Haven, CT +9%
Fayetteville, AR-MO +9%
St. Louis, MO-IL +9%
Mansfield, OH +8%
Harrisonburg, VA +8%
Billings, MT +8%
Davenport, IA-IL +8%
Albany, NY +8%
Allentown, PA-NJ +7%
Spokane, WA +7%
Springfield, OH +7%
Kansas City, MO-KS +7%
Reading, PA +7%
Cleveland, OH +7%
Burlington, NC +7%
Pueblo, CO +7%
Erie, PA +6%
Yakima, WA +6%
Green Bay, WI +6%
Lancaster, PA +6%
Sheboygan, WI +6%
Youngstown, OH-PA +6%
Wenatchee, WA +6%
Gary, IN +5%
Athens, GA +5%
Topeka, KS +5%
Cheyenne, WY +5%
Durham, NC +5%
Fond du Lac, WI +4%
Atlanta, GA +4%
Champaign, IL +4%
Bridgeport, CT +4%
Hartford, CT +4%
Boise City, ID +4%
Sandusky, OH +3%
Akron, OH +3%
Columbus, OH +3%
Omaha, NE-IA +3%
Salt Lake City, UT +3%
Wausau, WI +3%
Lawrence, KS +3%
Kennewick, WA +3%
New Orleans, LA +3%
Rochester, MN +2%
Anderson, IN +2%
Chattanooga, TN-GA +2%
Lima, OH +2%
Amarillo, TX +2%
Metro area % over/
under-
valued
Spartanburg, SC +2%
Florence, SC +1%
Bloomington, IN +1%
Louisville, KY-IN +1%
Raleigh, NC +1%
Provo, UT +1%
Lexington, KY +1%
Ogden, UT +1%
Winston-Salem, NC +1%
Cincinnati, OH-KY-IN +1%
Appleton, WI +1%
Columbia, MO +1%
Cedar Rapids, IA +1%
Houma, LA +1%
Lafayette, LA  0%
Columbia, SC  0%
Greenville, SC  0%
Greensboro, NC  0%
Dayton, OH  0%
Oshkosh, WI  0%
Utica, NY  0%
Decatur, IL  0%
Lincoln, NE  0%
Scranton, PA -1%
Pittsburgh, PA -1%
Monroe, LA -1%
Las Cruces, NM -1%
Knoxville, TN -1%
Harrisburg, PA -1%
Des Moines, IA -1%
Fargo, ND-MN -2%
Greenville, NC -2%
Sioux Falls, SD -2%
Charlotte, NC-SC -2%
Baton Rouge, LA -2%
Rocky Mount, NC -2%
Sherman, TX -3%
Bloomington, IL -3%
Albany, GA -3%
Kokomo, IN -3%
Nashville, TN -3%
Owensboro, KY -3%
Albuquerque, NM -3%
Jefferson City, MO -3%
Evansville, IN-KY -3%
Columbus, IN -3%
Lubbock, TX -3%
Waco, TX -4%
Augusta, GA-SC -4%
Columbus, GA-AL -4%
Warner Robins, GA -4%
Idaho Falls, ID -4%
Wichita, KS -4%
Iowa City, IA -4%
Bowling Green, KY -4%
Tyler, TX -4%
Birmingham, AL -4%
Springfield, IL -4%
Buffalo, NY -5%
Corpus Christi, TX -5%
Macon, GA -5%
Austin, TX -5%
Syracuse, NY -5%
Ft Wayne, IN -6%
Tulsa, OK -6%
Ft Smith, AR-OK -6%
Binghamton, NY -6%
Abilene, TX -6%
Alexandria, LA -6%
San Angelo, TX -6%
Indianapolis, IN -6%
Hattiesburg, MS -6%
Midland, TX -6%
South Bend, IN-MI -6%
Oklahoma City, OK -7%
Springfield, MO -7%
Mobile, AL -7%
Shreveport, LA -7%
Decatur, AL -7%
Little Rock, AR -8%
Bismarck, ND -8%
Houston, TX -8%
Lafayette, IN -9%
Jackson, MS -9%
Charleston, WV -10%
Ft Worth, TX -10%
Rochester, NY -10%
Longview, TX -10%
San Antonio, TX -10%
Elkhart, IN -11%
Dallas, TX -11%
Memphis, TN-MS-AR -11%
Huntsville, AL -11%
Beaumont, TX -12%
Killeen, TX -13%
Odessa, TX -14%
Montgomery, AL -15%
El Paso, TX -17%
College Station, TX -19%
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