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Research Firm Says Housing Currently Undervalued by 14% to 17% 

 December 7, 2010

By  Nancy Braun

The following is an excerpt from an article in DSNews by Carrie Bay.

The sharp fall in residential property prices in the third quarter means that housing in the United States has become even more undervalued, according to the analysts at Capital Economics.

Based on the latest S&P Case-Shiller index, Capital Economics has concluded that house prices are now 17 percent undervalued relative to disposable income per capita. Housing has never before looked as undervalued, the firm pointed out in a research note released to DSNews.com.

Looking at the data included in the index compiled by the Federal Housing Finance Agency (FHFA), residential home prices are 14 percent undervalued, which is also a record, according to Capital Economics.

The housing affordability index from the National Association of Realtors (NAR) remains close to its record high. Capital Economics explained that NAR’s affordability assessment indicates that a median income household with a 20 percent down payment can now more easily afford the monthly mortgage payments on a median-priced home than at any time in the last 30 years.

Rock-bottom interest rates have also helped to bring owning a home within the means of more Americans. Mortgage rates have begun to head upward from half-
century lows in recent weeks, but Capital Economics says the increase has done little to reduce overall affordability.

Full Article

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Nancy Braun


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