Core Logic: The Washington DC Housing Market Rated "Overvalued"
By Jeff Clabaugh @ WTOP
September 7, 2017
CoreLogic reached this determination by comparing home prices to their long-run, sustainable levels, which are supported by market fundamentals like h

EXCERPT: The D.C. region is one of four metro areas real estate firm CoreLogic Inc. now considers “overvalued,” based on its analysis that includes disposable incomes and median prices.

Of the nation’s 10 largest metro areas, CoreLogic says Washington, along with Denver, Houston and Miami have tipped from “at value.” The U Street Corridor’s newest luxury apartment building is now leasing, and rents range from about $3,000 for a one-bedroom apartment to more than $11,000 a month for a penthouse.

What’s driving it? – The inventory of homes continues to be limited and that, combined with the rising demand to buy homes and incomes that aren’t keeping pace, are to blame.

CoreLogic reached this determination by comparing home prices to their long-run, sustainable levels, which are supported by market fundamentals like household income (because homeowners use most of their income to pay for home mortgages).

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A market that is overvalued is one in which home prices are at least 10 percent higher than the long-term, sustainable level. “The Washington area overall is a very high-cost market, and prices have risen much more over the last few years than incomes for regular families,” CoreLogic chief economist Frank Nothaft told WTOP.

“There are still some parts of the overall D.C. metro area that still are fairly valued, but they tend to be way at the outer rim of the metropolitan area. It’s really hard to find affordable housing either in D.C. or close,” Nothaft said.

He says it is a simple mathematical equation. – “Just over the last year in the Washington, D.C. area, home prices have risen an average of 5 percent over the last year, and mortgage rates are up a half percentage point over the last 12 months.

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