NEW YORK (CNNMoney.com) -- It may be the
best time to buy a house in more than four
years.
Home prices have dropped so quickly
and so far that valuations - the difference
between what a home should cost and its
actual price - are the lowest they've been
since 2004, according to a report.
The Cleveland-based bank National City
Corp. (NCC,
Fortune 500), together with financial
analysis firm Global Insight, revealed
Tuesday that more than 88% of the 330
housing markets surveyed showed price
declines and improved affordability during
the last three months of 2007.
"Housing valuations are almost back to
long-term norms," said National City's chief
economist, Richard DeKaser. He called
current affordability "the best in the past
four years."
But DeKaser cautioned that home prices
could fall even further.
"This isn't to say home price declines
are over," he said. "We could move below
historic norms. By the end of 2008, housing
markets could be broadly under valued."
Prices still improving
There are still 21 housing markets, or 6%
of those surveyed, that are severely over
valued, including Atlantic City and Madera
Calif. That's down from 56 overvalued
markets at the peak of the housing bubble in
2006.
The report compares actual
median home prices with what the authors
determine are proper home values based on
population density, relative income levels
and interest rates, as well as historically
observed market premiums or discounts, to
determine whether markets are over or under
valued.
The report also factors in market
intangibles that make some areas more
desirable places to live, and more
expensive.
"Declines are no longer confined to
once-frothy markets," said DeKaser.
The survey covered home valuations during
the last three months of 2007, but DeKaser
pointed out there's reason to believe that
valuations are even more favorable for
buyers today.
Price declines have continued into 2008
and
interest rates, although they have inched up
lately, have been steady or lower
compared to late last year. There have even
been wage gains; personal income rose 0.5%
in December.
Soaring foreclosure rates have added
inventory to many housing markets,
depressing home prices further.
The biggest gains in affordability
occurred in California, Michigan and
Florida, which are areas that have also been
some of the
hardest-hit by foreclosures. Those
states registered 43 of the 50 biggest price
declines.
Bend, Ore. currently tops the
overvaluation list. Home prices there were
judged to be about 59% higher than their
fair-market value. Miami, despite a median
home price decline of 5.7% last year, is the
most overvalued big city, by 44%.
All the best bargains were found in
Louisiana and Texas. Houses in Houma, La.
were under valued by 31.2%, according to the
report. Dallas was the most undervalued big
city, by 30%. 
