Home prices in extremely overvalued U.S. metropolitan areas, including Miami, fell nearly 37%, on average, between 2005 and the fourth quarter of last year, when prices began to stabilize, according to a quarterly update on real estate values from IHS Global Insight.
In news release, senior economist and manager of HIS Global Insight, Jeannine Cataldi, stated:
"Despite the ever-increasing risk of overvaluation – and subsequent devaluation – buyers continued to purchase properties at heavily inflated prices."
The report found that, at the peak of overvaluation in the fourth quarter of 2005, there were 52 markets that IHS considered to be extremely overvalued and 85 more that were significantly overvalued.
“Not surprisingly, these metros crashed hard when the real estate market collapsed,” the report noted.
Metropolitan areas in California and Florida accounted for 36 of the 52 extremely overvalued markets. Miami, where prices have fallen 35.8% between the fourth quarter of 2005 and 2009, came in third on the list, at 49.4% overvalued.
In 2005, the average price of a home in Miami was $281,300, but, by the fourth quarter of 2009, the average price had fallen to $180,500, according to the report.
By the end of last year, there were no extremely overvalued metropolitan areas and, for the country as a whole, the report suggests that the housing market is now slightly undervalued.
For the fourth quarter of 2009, prices fell by only 0.1%, quarter-to-quarter, according to the Federal Housing Finance Agency, indicating that the housing market is close to achieving stabilization, the report noted.
What went up really came down, and those who purchased homes five years ago at the peak of the real estate bubble are paying the price today.
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