In 2005 IHS Global Insight, the world's leading company for economic and financial analysis, began tracking housing prices compared to incomes throughout the United States. They just released The IHS Global Insight survey for third quarter 2009, and it reflects that for the first time since the survey began that there are currently no metro areas considered to be "extremely overvalued" – meaning prices valued at over 35% more than prices a person with average income could afford for the area. 

 

When the survey began in 2005, 52 metro areas were extremely overvalued. Now, the housing market as a whole is undervalued (which means prices at least 14% below what is considered to be "affordable" for a person with an average income in the area) by 8.6%. This is a sharp contrast with the market peak in 2006 when 26.1% of homes were overvalued (at least 14% inflated in comparison with average incomes).

 

The encouraging news is that the third quarter of 2009 ended the housing depreciation that has marked the past two years. In year-over-year terms, house prices actually increased during the third quarter by 0.9%, according to the Federal Housing Finance Agency. This is the first increase since the second quarter of 2007 when the national housing market first started plummeting. Compared to the 2007 high, the U.S. housing market is now down 10.7%, on average.

 

Since the housing price decline began, only 16 areas have had home prices remain relatively stable: and all are in the center of the US: with six in Texas. In contrast, the costal housing markets have been he hardest hit with Los Angeles and Miami having the most significant housing bubble bursts. These two cities did have a price uplift for the third quarter of 2009, with increases above 4%.

 

James Diffley, the group managing director of HIS Global Insight's Regional Services Group stated that "While the rate of decline has decreased throughout the year as the market began to stabilize, it's not at all clear that the market is on a recovery path."

 

The overall condition of the housing market is still unstable, and HIS Global Insight's Regional Real Estate Service manager, Jeannine Cataldi, says "Economic conditions remain dire, with unemployment likely to remain stubbornly near 10% for some time." The first-time homebuyer tax credit may have played a role in the slight increase that is reflected in the third quarter of 2009.

 

 

At least prices have finally levelled to reasonable rates for prospective homeowners with median incomes. The difficult part is that people are wary of big purchases in an unstable financial climate and loans are hard to secure.  However, things do seem to be improving slightly, and it appears that only time will reveal the mystery destiny of the housing market. Hopefully the upward trend continues, the government band-aids help healing and we're on the road to slow recovery.