Home Prices Overvalued by 18%: Fitch | Cross River NY Homes

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In a new report on home prices and economic risk, Fitch Ratings estimates that home prices today are overvalued, raises serious concerns about the long term viability of the current housing recovery and concedes that significant price declines are unlikely though declines in real terms are not.

Fitch estimates that current prices currently are overvalued in real terms by approximately 18% nationally, led primarily by exuberant gains in the West, lingering economic weakness may hamper demand as the housing market normalizes and approaches a new equilibrium.

“The current housing market is buoyed by a unique set of market forces that include tightly restricted supply and the short-term effects of both investor money and the pent-up demand of individual owners. Long-term housing demand originates from a strong base of workers, measured both in wages and employment. With today’s economy lagging on both indicators, Fitch continues to have concerns about the sustainability of the rapidly rising housing market,” the report said.

However, significant price declines are unlikely due to a number of factors such as continued government market support and the high likelihood of an extended economic recovery, but growth rates are expected to slow significantly over the next year. With home price growth expected to stagnate, there is a potential for declines in real terms, especially if economic growth couples with low interest rates to produce higher levels of inflation, the report said.


http://www.realestateeconomywatch.com/2014/01/home-prices-overvalued-by-18-fitch/


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