Monday, June 08, 2009

Report: Dallas homes are among most undervalued in U.S.

Dallas-Fort Worth has some of the most undervalued homes in the country, according to a new report.

But don't expect that finding to cause a jump in prices.

Home prices in the Dallas area are almost 32 percent undervalued, according to the latest measure by IHS Global Insight. The same study shows that prices here have remained virtually unchanged over the year ending with first quarter 2009.

The Dallas area is one of a handful of Texas housing markets the Massachusetts-based research firm considers to be among the most undervalued in the country.

"What it means when it is undervalued is the market could handle price increases," said Jeannine Cataldi, Global Insight's senior economist and one of the authors of the report. "It just means prices could go up in that market without any long-lasting damage to the market.

"Texas has always been in the undervalued category."

Indeed, Global Insight now estimates that the overall U.S. housing market is more than 10 percent undervalued. That compares with an overvaluation of more than 24 percent at the peak of the market in 2005. The analysts say that big markdowns in home values in many areas of the country have reset prices in most cities.

The home markets Global Insight says are still the most overvalued are in New Jersey and Washington state.

To make valuation determinations, "we have some metrics we look at, including population density, housing density, previous house prices, interest rates and income," Cataldi said.

Texas has customarily had undervalued housing because of the ease of building in the state, she said.

"Even if there was a mad dash to Texas, there is enough room that housing could be built up without much of an issue," Cataldi said. "In California and Florida, they don't have a whole lot of land left to build on."

Prices declined in the first quarter in 199 of the 300 markets the researchers surveyed.

In the Dallas area, the falloff from the end of 2008 was about 2 percent.

Texas markets have long been considered some of the cheapest places in the country to purchase a home.

But while home prices in Texas cities are lower than the national average, the state's homeowners pay some of the highest property taxes and insurance rates in the nation.

Also, wages in most Texas cities are below those in many other major markets.

HOW HOME VALUES COMPARE
Estimate of home valuation based on factors including population density, housing density, previous house prices, interest rates and income.
MOST OVERVALUED MARKETS
Atlantic City, N.J.
44.1%
Ocean City, N.J.
33.8%
Wentachee, Wash.
29.3%
Longview, Wash.
26.6%
Honolulu
25.7%
MOST UNDERVALUED MARKETS
Vero Beach, Fla.
-42.5%
Houma, La.
-41.4%
Las Vegas
-40.9%
Merced, Calif.
-40.1%
Cape Coral-Ft. Meyers, Fla.
-39.1%
U.S. Average
-10.6%
Dallas
-31.6%

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By STEVE BROWN / The Dallas Morning News