What to Do in a Market That Is Headed for a Falloff | WSJ
What to Do in a Market That Is Headed for a Falloff
By Matthew Heimer
From The Wall Street Journal Online
After hurtling along for years, the nationwide real-estate boom has come to a screeching halt. In 2005, home prices in the U.S. rose more than 12%; this year, the National Association of Realtors expects appreciation to reach just 1.9% -- the lowest gain since 1992.
Rising mortgage rates and selloffs by skittish real-estate investors have helped depress housing prices in many metropolitan areas. But there's another factor that many observers miss: the relationship between home prices and incomes.
When the cost of housing in a given area grows far faster than local wages and salaries, the pool of potential buyers shrinks, and prices are much more likely to sink.
For the past five years, SmartMoney magazine has worked with Ingo Winzer, president of the consulting firm Local Market Monitor, evaluating home-sale prices against local income to determine whether a given market is overvalued, undervalued or fairly valued. Mr. Winzer relies on more than 15 years of housing and income statistics to find out where prices are headed.
According to Mr. Winzer, any market that's more than 30% overvalued...
By Matthew Heimer
From The Wall Street Journal Online
After hurtling along for years, the nationwide real-estate boom has come to a screeching halt. In 2005, home prices in the U.S. rose more than 12%; this year, the National Association of Realtors expects appreciation to reach just 1.9% -- the lowest gain since 1992.
Rising mortgage rates and selloffs by skittish real-estate investors have helped depress housing prices in many metropolitan areas. But there's another factor that many observers miss: the relationship between home prices and incomes.
When the cost of housing in a given area grows far faster than local wages and salaries, the pool of potential buyers shrinks, and prices are much more likely to sink.
For the past five years, SmartMoney magazine has worked with Ingo Winzer, president of the consulting firm Local Market Monitor, evaluating home-sale prices against local income to determine whether a given market is overvalued, undervalued or fairly valued. Mr. Winzer relies on more than 15 years of housing and income statistics to find out where prices are headed.
According to Mr. Winzer, any market that's more than 30% overvalued...
posted by Patrick Leblanc at 5:50 PM
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