Extreme Housing Overvaluation Rising?

More than 50 metropolitan areas representing 32% of the U.S. housing market were "extremely overvalued" and faced a high risk of price declines in the second quarter, according to an analysis by National City Corp., Cleveland, and Global Insight, Waltham, Mass.The companies said the analysis looked at 299 U.S. real estate markets and concluded that 56 metro areas may face price declines, up from 53 in the first quarter. Five areas were added to the list, and two -- Boston and Essex, Mass. -- were removed because fundamentals such as income and population gains had improved, they said. The adjustment in the Boston area "illustrates the possibility for orderly corrections, rather than inevitable crashes," said Philip Hopkins, managing director of U.S. Regional Services at Global Insight. "Outside the hottest housing markets, some signs of a slowdown in the rate of price growth were evident." The average overvaluation level fell from 22.7% to 19.9%, with 171 areas showing a decline in the extent of overvaluation in the second quarter, he said. The analysis can be found online at http://www.nationalcity.com/economics and http://www.globalinsight.com/housingindex.