Naples, Other Overvalued Housing Markets Continue to Appreciate

While there may be a housing bubble - and a record number of people have fallen into Florida home loan debt as a result - the rich continue to get richer in such a scenario; at least according to a study of home prices released by National City Corp., a financial holding company, and Global Insight, a financial information provider.

Based on the figures, the most overvalued housing markets in the nation recorded much higher price increases during the first quarter of 2006 than the least overvalued markets. The chart below illustrates cities that are NOT ripe for affordable Florida home loans, listed according to metra area, percent overvalued in the fourth quarter of 2005 and the median home price early in 2006:

Naples, FL: 93.5%; $383,000
Salinas, CA : 81.4%; $608,600
Port St. Lucie, FL: 72.8%; $240,800

As you can see, two cities in the Sunshine State rank among the top three “worst buys.” Those hoping for a reasonable Florida mortgage loan should avoid these areas.

Overall, in the 50 most overvalued markets, prices increased 2.5 percent from the fourth quarter to the first, an annualized rate of 10.1 percent. Overall, U.S. home prices rose at an annualized rate of 7.3 percent for the quarter.

As was the case six months ago, the Naples real estate sector was the most overvalued U.S. market. By the last quarter of 2005, the median price for a home, at $367,200, was about 94 percent over what National City judged it should be.

But by the end of the first quarter, the median home price in Naples was $383,000, an increase of more than four percent in just three months.

According to Richard DeKaser, National City’s chief economist, there is some evidence that prices may be ripe for a correction. A year ago overvalued markets were appreciating even quicker than they are today. At least they’re now rising at a slower pace.

For now, however, sellers are flooding Naples and other expensive markets. They’re trying to find Florida home loan buyers while prices are still high.