Michelle Meyer, a (very good) economist at Bank of America Merrill Lynch, takes a look at the most and least overvalued real estate markets in the US circa now. I believe that disposable income per capita is an important consideration here…
The recovery in home prices has been impressive. National home prices have increased 24% from the trough and the most recent data for December suggests 2014 ended with prices up 4.6%. The improvement was driven by those markets with the steepest drop, such as Las Vegas, Phoenix and Los Angeles. The old adage proved true – the sharper decline, the faster the snapback. The gain in home price appreciation has since slowed in these regions as the markets move further away from the crisis period and are less influenced by distressed activity. This means that we should once again focus on the fundamental drivers of home prices – income growth and overall affordability.
US Economic Weekly Bank of America Merrill Lynch – February 26th, 2015