Naples Housing Market is Most Overvalued

A new survey reveals a major problem in the Florida housing market: Despite a cool off in home prices, more markets are overpriced than ever. Naples leads the way.

Higher interest rates - especially for adjustable-rate Florida home mortgages - helped push manu cities into the overpriced category last quarter, according to Jeannine Cataldi, an economist with Global Insight, which conducted the analysis with National City.

Inside the survey

Despite a decline in Florida home loan rates since the end of the second quarter, the 30-year fixed rate is still at 6.4 percent (versus 5.8 percent a year ago). The difference for ARMs is even bigger.

The survey also takes into account differences in population density, relative income levels and historical valuations. Markets with premiums above 34 percent of “fair value” were deemed at risk for price corrections.

“Price growth will have to be stagnant while income and employment rises for housing valuations to fall,” said Cataldi.

Despite a substantial cooling of real estate markets, home prices were still 10.6 percent higher nationwide than a year ago, according to the Office of Federal Housing Enterprise Oversight. This is why affordable housing initiatives are being taken around the state.

Seventy-nine of the 317 markets studied in the Global Insight/National City report were judged to be “extremely overvalued,” up from 68 during the first quarter.

“Significant slower appreciation, or outright declines, among overvalued markets are a signal that we are in the early stages of a correction,” said Richard DeKaser, National City’s chief economist.

The Naples housing market remains the most overvalued market in the nation, deemed 101.5 percent above what National City considers fair value. Bend, Oregon, was second to Naples, 89.3 percent overvalued.

Until this problem is corrected, it will be difficult for lower-income buyers to find a Florida mortgage loan. We suggest completing the FREE form atop this page for more information from our panel of brokers.