Mischer News

A report issued Friday by IHS Global Insight confirms the local economist’s optimistic observations regarding the stability of Houston home prices, which is music to the ears of Houston area development groups.

Across the country, house prices in extremely overvalued U.S. metropolitan areas declined nearly 37 percent on average between 2005, the peak of the real estate bubble, and the end of 2009 when prices stabilized, according to IHS’s fourth quarter 2009 report.

“The high risk of a home price collapse that we reported in 2005 was borne out, and the subsequent price declines across metropolitan areas are very closely correlated with our valuation metric,” said James Diffley, group managing director of IHS Global Insight’s Regional Services Group. “The higher the overvaluation, the harder the crash.”

In Houston, average home prices began at an average of $110,100 in the fourth quarter of 2005, 20 percent undervalued compared to the national average. By the end of 2008, Houston prices had actually risen to $122,700, and were still 26 percent undervalued compared to the rest of the country.

“Despite the ever-increasing risk of overvaluation — and subsequent devaluation — buyers continued to purchase properties at heavily inflated prices,” said Jeannine Cataldi, senior economist and manager of IHS Global Insight’s Regional Real Estate Service.

Prices appreciated more than 90 percent from when the bubble began in early 2002 in more than 50 percent of the 52 US housing markets including California and Florida. For the fourth quarter 2009, prices fell by only 0.1 percent quarter-to-quarter, according to the Federal Housing Finance Agency, indicating that the housing market is close to achieving stabilization. All good news for Houston’s sprawling communities and their continued growth.

Source: Houston Business Journal and IHS Global