August 2007 Local Real Estate Market Research
Hello fellow real estate investor…
August has come and almost gone… way too fast.
I apologize about not getting this out to you sooner, but here it is…
The August 2007 Real Estate Market Statistics Report – Part 1
As always, these statistics are from our friends over at John Burns Real Estate Consulting.
In Part 1 we will go over the current housing cycle barometer, which interprets the affordability of a markets housing. (0-10 : 0 being most affordable)
Timing of “Fairly Priced” Homes Varies by Market
For prices to return to their historical median ratio of housing costs / income, national prices would need to revert back to mid-2004 levels. This would be a 14% correction in price, assuming stable mortgage rates (an iffy assumption at this point). This is not a projection – just a calculation for your information. The timing varies significantly by market, however. In areas such as Charlotte and Dallas, a price correction to the levels of earlier this year or the middle of 2006 would suffice. For markets such as San Diego and Boston, the price correction would have to be all the way back to 2002.
In our June newsletter, “Resale Home Prices Are Likely to Fall in Many Markets,” we calculated the dollar amount that existing home prices would need to fall to reach a “fairly priced” level, taking into account mortgage rates (6.42% at the time) and household incomes. In markets that have had a tremendous run-up in prices, this meant a correction in excess of 30%. For some markets, it meant no correction at all.
This month, we looked at the timing of that most recent median affordability level – where our Housing Cycle Barometer™ rating (see definition below) was 5.0 – for the 50 largest housing markets in the country. Select major markets are shown in the graph above, which also displays the trends in the national median existing home price. Rising mortgage rates will push the correction date back further, and vice versa.
The table that follows provides a more detailed list of these top markets (plus Boston and Honolulu), including their current HCB rating.
| METRO AREA | CURRENT HCB |
| 2007 Q2 | |
| Charleston, SC | 5.1 |
| Fort Worth, TX | 5.2 |
| Nashville, TN | 5.6 |
| Raleigh-Cary, NC | 5.2 |
| 2007 Q1 | |
| Dallas, TX | 5.3 |
| Salt Lake City, UT | 5.2 |
| 2006 Q2 | |
| Charlotte, NC-SC | 5.1 |
| McAllen, TX | 5.6 |
| 2005 Q4 | |
| Austin, TX | 5.5 |
| Boise City, ID | 5.8 |
| 2005 Q3 | |
| Honolulu, HI | 5.6 |
| Philadelphia, PA | 5.7 |
| Richmond, VA | 5.6 |
| 2005 Q2 | |
| Houston, TX | 5.5 |
| San Antonio, TX | 5.5 |
| 2005 Q1 | |
| Jacksonville, FL | 6.1 |
| Phoenix, AZ | 6.8 |
| St. Louis, MO | 6.4 |
| Tucson, AZ | 6.7 |
| Virginia Beach, VA | 7.4 |
| 2004 Q3 | |
| Baltimore, MD | 9.9 |
| 2004 Q2 | |
| United States | 6.3 |
| Denver, CO | 6.6 |
| Fort Myers, FL | 6.3 |
| Myrtle Beach, SC | 6.4 |
| Newark-Union, NJ-PA | 5.5 |
| Orlando, FL | 7.3 |
| Tampa, FL | 6.4 |
| 2004 Q1 | |
| Baton Rouge, LA | 6.0 |
| Portland, OR | 9.9 |
| 2003 Q4 | |
| Las Vegas, NV | 7.3 |
| 2003 Q3 | |
| Chicago, IL | 6.1 |
| Edison, NJ | 6.4 |
| Los Angeles, CA | 10.0 |
| Minneapolis, MN | 5.7 |
| Oakland, CA | 9.1 |
| Riverside-San Bernardino, CA | 9.1 |
| Washington D.C. | 9.5 |
| 2003 Q2 | |
| Miami, FL | 8.9 |
| 2003 Q1 | |
| New York, NY | 7.9 |
| Orange County, CA | 9.7 |
| Sacramento, CA | 8.0 |
| 2002 Q2 | |
| San Diego, CA | 8.5 |
| 2002 Q1 | |
| Boston, MA | 6.5 |
The Housing Cycle Barometer™ calculates the ratio between home prices and income levels, and the ratio between mortgage payments and income levels. Then, we analyze 26+ years of history in each metropolitan area, and compare the current ratios to the median ratios in each area. The down payment and mortgage payments are appropriately weighted based on total expenditures over the life of a typical home purchase. This methodology accurately determines which markets are overpriced and underpriced, even in an environment with historically low mortgage rates.
Once again, the Housing Cycle Barometer for August 2007 is courtesy of our friends over at John Burns Real Estate Consulting.
Be on the look out for Part 2 of our August 2007 Real Estate Market Statistics Report.
Hey, my name is Trevor and I'm the founder of The REI Brain and a real estate investor since the age of 21. Right now, my focus in real estate investing is multi-family income properties and I have plans on moving more into the commercial real estate investment world in 2008 and beyond. 
Leave a Reply