84% of Markets Are Overpriced

By John Burns

September 6, 2006

Of the 100 largest metropolitan areas (based on annual permit activity):

Only 13 markets are below their historical median affordability level, 3 are exactly at their median and 84 are above the median.
The four markets that have remained very inexpensive are Cincinnati, Indianapolis, Cleveland and Pittsburgh.
Nine markets have even worse affordability levels than when mortgage rates were 18%+ in the early 1980s: New York, Washington, D.C., Los Angeles, Seattle, Portland (Oregon), Baltimore, Edison (New Jersey), Nassau (New York) and Naples.

Our methodology compares current affordability in each market to historic affordability in the market to determine whether housing is more or less expensive in the market than in price downturns. From the map below, it is evident that the overpriced markets are those along the coasts, while the inland markets tend to be less overpriced. Supply constraints make the coastal markets susceptible to price bubbles, while plentiful supply makes the inland markets susceptible to oversupply bubbles.

About the Barometer
The Housing Cycle Barometer™ calculates the ratio between home prices and income levels, and the ratio between mortgage payments and income levels. Then, we analyze 25 years of history in each metropolitan area, and compare the current ratios to the median ratios in each area. The down payment and mortgage payments are appropriately weighted based on total expenditures over the life of a typical home purchase. This methodology accurately determines which markets are overpriced and underpriced, even in an environment with historically low mortgage rates.

The Barometer ranges from 0 to 10, and is generally categorized as follows:

Potential Housing Bubble: 7.5 to 10.0
Overpriced in Comparison to History: 5.0 to 7.5
No Housing Bubble: 0.0 to 5.0

A Barometer reading above 5.0 does not mean that the housing market will deteriorate this year. While the Barometer is very meaningful from a macro standpoint, it does not consider neighborhood market conditions, nor does it consider the ability of certain real estate executives to execute their business plans in tough market conditions.

HOUSING CYCLE BAROMETER™
This is the most current available data for all variables and markets.

					Down Payment / Income Information		Mortgage Payment / Income Information
		Housing Cycle Barometer	Current Price	Current Income	Current Down Pmt	Current D Pmt /Inc	Current Ann Mtg Pmt	Current Mtg Pmt/Inc	Housing Cost /Inc Ratio
1	Atlanta, GA	5.6	$173,200	$53,735	$34,640	64%	$10,751	20%	29%
2	Houston, TX	5.5	$155,400	$51,826	$31,080	60%	$9,646	19%	27%
3	Phoenix, AZ	6.9	$268,000	$56,879	$53,600	94%	$16,636	29%	43%
4	Riverside-San Bernardino, CA	9.9	$390,000	$50,653	$78,000	154%	$24,209	48%	70%
5	Chicago, IL	7.5	$258,000	$52,950	$51,600	97%	$16,015	30%	44%
6	Las Vegas, NV	7.6	$310,000	$54,399	$62,000	114%	$19,243	35%	52%
7	Dallas, TX	5.2	$165,800	$55,218	$33,160	60%	$10,292	19%	27%
8	New York, NY-NJ	10.0	$559,992	$53,383	$111,998	210%	$34,761	65%	95%
9	Orlando, FL	7.7	$250,000	$50,217	$50,000	100%	$15,519	31%	45%
10	Tampa, FL	7.4	$203,000	$44,455	$40,600	91%	$12,601	28%	41%
11	Washington D.C., DC-VA-MD-WV	10.0	$439,633	$72,041	$87,927	122%	$27,290	38%	55%
12	Fort Myers, FL	7.3	$264,500	$49,582	$52,900	107%	$16,419	33%	48%
13	Austin, TX	5.3	$177,000	$50,847	$35,400	70%	$10,987	22%	32%
14	Miami, FL	8.8	$339,000	$44,874	$67,800	151%	$21,043	47%	68%
15	Los Angeles, CA	10.0	$549,000	$49,867	$109,800	220%	$34,079	68%	100%
16	Charlotte, NC-SC	5.2	$176,000	$53,549	$35,200	66%	$10,925	20%	30%
17	Jacksonville, FL	6.6	$193,000	$51,526	$38,600	75%	$11,980	23%	34%
18	San Antonio, TX	5.4	$146,800	$44,780	$29,360	66%	$9,112	20%	30%
19	Fort Worth, TX	5.4	$120,300	$51,124	$24,060	47%	$7,468	15%	21%
20	Denver, CO	6.1	$246,000	$57,564	$49,200	85%	$15,270	27%	39%
21	Seattle, WA	10.0	$390,000	$53,023	$78,000	147%	$24,209	46%	67%
22	Minneapolis, MN-WI	6.3	$246,500	$67,080	$49,300	73%	$15,301	23%	33%
23	Portland, OR-WA	10.0	$277,000	$49,099	$55,400	113%	$17,195	35%	51%
24	Raleigh-Cary, NC	5.1	$190,000	$56,872	$38,000	67%	$11,794	21%	30%
25	Sacramento, CA	9.4	$395,000	$53,869	$79,000	147%	$24,519	46%	66%
26	Nashville, TN	5.8	$161,300	$48,770	$32,260	66%	$10,013	21%	30%
27	Indianapolis, IN	1.6	$121,615	$50,977	$24,323	48%	$7,549	15%	22%
28	Kansas City, MO-KS	5.4	$155,913	$48,822	$31,183	64%	$9,678	20%	29%
29	Lakeland, FL	6.6	$173,000	$41,934	$34,600	83%	$10,739	26%	37%
30	St. Louis, MO-IL	6.9	$172,500	$46,099	$34,500	75%	$10,708	23%	34%
31	Myrtle Beach, SC	6.4	$198,567	$39,001	$39,713	102%	$12,326	32%	46%
32	Sarasota, FL	9.3	$270,000	$49,066	$54,000	110%	$16,760	34%	50%
33	Cincinnati, OH-KY-IN	1.2	$135,000	$50,693	$27,000	53%	$8,380	17%	24%
34	Philadelphia, PA	7.5	$230,820	$59,395	$46,164	78%	$14,328	24%	35%
35	Memphis, TN-MS-AR	4.2	$143,495	$44,169	$28,699	65%	$8,907	20%	29%
36	Oakland, CA	9.4	$630,000	$68,659	$126,000	184%	$39,107	57%	83%
37	Boise City, ID	5.3	$176,076	$53,430	$35,215	66%	$10,930	20%	30%
38	San Diego, CA	9.1	$565,000	$59,321	$113,000	190%	$35,072	59%	86%
39	Tucson, AZ	6.5	$229,995	$46,821	$45,999	98%	$14,277	30%	45%
40	Charleston, SC	5.6	$207,000	$46,522	$41,400	89%	$12,849	28%	40%
41	Columbus, OH	5.0	$147,000	$50,737	$29,400	58%	$9,125	18%	26%
42	Virginia Beach, VA-NC	8.1	$236,004	$50,277	$47,201	94%	$14,650	29%	43%
43	Baltimore, MD	10.0	$305,863	$60,598	$61,173	101%	$18,986	31%	46%
44	West Palm Beach, FL	7.9	$325,000	$51,228	$65,000	127%	$20,174	39%	58%
45	Port St. Lucie, FL	9.5	$235,000	$44,015	$47,000	107%	$14,587	33%	48%
46	Richmond, VA	6.7	$227,000	$51,569	$45,400	88%	$14,091	27%	40%
47	Warren, MI	6.6	$196,365	$51,109	$39,273	77%	$12,189	24%	35%
48	Edison, NJ	10.0	$399,658	$68,030	$79,932	117%	$24,808	36%	53%
49	Salt Lake City, UT	5.0	$210,000	$59,388	$42,000	71%	$13,036	22%	32%
50	Bakersfield, CA	9.0	$265,000	$42,492	$53,000	125%	$16,450	39%	57%
51	Oklahoma City, OK	5.0	$123,509	$49,771	$24,702	50%	$7,667	15%	22%
52	McAllen, TX	3.5	$107,000	$30,731	$21,400	70%	$6,642	22%	32%
53	Wilmington, NC	6.6	$217,300	$45,162	$43,460	96%	$13,489	30%	44%
54	Melbourne, FL	7.0	$209,950	$50,674	$41,990	83%	$13,032	26%	38%
55	Ocala, FL	7.8	$157,000	$36,700	$31,400	86%	$9,746	27%	39%
56	Newark-Union, NJ-PA	8.6	$434,819	$67,715	$86,964	128%	$26,991	40%	58%
57	Birmingham, AL	5.7	$169,536	$40,635	$33,907	83%	$10,524	26%	38%
58	Fayetteville, AR-MO	4.9	$135,325	$45,280	$27,065	60%	$8,400	19%	27%
59	Orange County, CA	9.5	$700,000	$70,812	$140,000	198%	$43,452	61%	90%
60	Columbia, SC	5.1	$123,950	$45,544	$24,790	54%	$7,694	17%	25%
61	Fort Lauderdale, FL	8.5	$330,000	$50,486	$66,000	131%	$20,484	41%	59%
62	Albuquerque, NM	5.1	$185,000	$50,033	$37,000	74%	$11,484	23%	34%
63	Fresno, CA	8.2	$285,000	$43,647	$57,000	131%	$17,691	41%	59%
64	Tacoma, WA	8.8	$267,500	$51,355	$53,500	104%	$16,605	32%	47%
65	Boston, MA	9.5	$416,744	$67,713	$83,349	123%	$25,869	38%	56%
66	Nassau, NY	10.0	$488,157	$81,208	$97,631	120%	$30,302	37%	54%
67	Baton Rouge, LA	5.5	$160,909	$44,387	$32,182	73%	$9,988	23%	33%
68	Greensboro, NC	4.2	$149,918	$45,318	$29,984	66%	$9,306	21%	30%
69	Knoxville, TN	5.5	$148,740	$40,305	$29,748	74%	$9,233	23%	33%
70	Colorado Springs, CO	6.2	$206,000	$51,759	$41,200	80%	$12,787	25%	36%
71	Naples, FL	10.0	$471,000	$54,373	$94,200	173%	$29,237	54%	79%
72	Des Moines, IA	5.4	$145,599	$50,147	$29,120	58%	$9,038	18%	26%
73	Cambridge, MA	7.1	$444,022	$76,912	$88,804	115%	$27,563	36%	52%
74	Provo-Orem, UT	4.0	$181,710	$53,241	$36,342	68%	$11,279	21%	31%
75	Tulsa, OK	4.3	$131,694	$48,905	$26,339	54%	$8,175	17%	24%
76	Daytona Beach, FL	6.5	$189,200	$43,139	$37,840	88%	$11,744	27%	40%
77	Cleveland, OH	1.6	$131,264	$47,444	$26,253	55%	$8,148	17%	25%
78	Reno, NV	7.8	$340,000	$55,829	$68,000	122%	$21,105	38%	55%
79	Omaha, NE-IA	5.5	$144,561	$50,009	$28,912	58%	$8,973	18%	26%
80	Pittsburgh, PA	2.0	$116,510	$46,048	$23,302	51%	$7,232	16%	23%
81	Louisville, KY-IN	5.5	$135,630	$44,764	$27,126	61%	$8,419	19%	27%
82	Little Rock, AR	4.8	$130,104	$48,589	$26,021	54%	$8,076	17%	24%
83	San Francisco, CA	9.4	$850,000	$72,255	$170,000	235%	$52,763	73%	107%
84	San Jose, CA	9.4	$760,000	$82,030	$152,000	185%	$47,176	58%	84%
85	Greenville, SC	6.0	$139,250	$41,731	$27,850	67%	$8,644	21%	30%
86	Punta Gorda, FL	8.3	$190,000	$40,126	$38,000	95%	$11,794	29%	43%
87	El Paso, TX	5.3	$129,900	$38,889	$25,980	67%	$8,064	21%	30%
88	Ogden-Clearfield, UT	4.2	$162,274	$55,941	$32,455	58%	$10,073	18%	26%
89	Hilton Head-Beaufort, SC	6.8	$279,500	$49,105	$55,900	114%	$17,350	35%	52%
90	Milwaukee, WI	8.4	$223,160	$47,508	$44,632	94%	$13,852	29%	43%
91	Durham, NC	5.1	$170,097	$49,645	$34,019	69%	$10,559	21%	31%
92	Madison, WI	7.1	$224,683	$51,531	$44,937	87%	$13,947	27%	40%
93	Killeen, TX	3.9	$110,660	$44,313	$22,132	50%	$6,869	16%	23%
94	Allentown, PA-NJ	9.6	$252,218	$52,887	$50,444	95%	$15,656	30%	43%
95	Stockton, CA	8.6	$415,000	$45,767	$83,000	181%	$25,761	56%	82%
96	Springfield, MO	5.4	$131,073	$35,286	$26,215	74%	$8,136	23%	34%
97	Providence, RI-MA	8.7	$298,929	$52,876	$59,786	113%	$18,556	35%	51%
98	Tallahassee, FL	5.5	$184,623	$43,574	$36,925	85%	$11,460	26%	38%
99	Lake-Kenosha, IL-WI	7.4	$282,139	$62,190	$56,428	91%	$17,514	28%	41%
100	Lexington, KY	5.4	$149,165	$41,540	$29,833	72%	$9,259	22%	33%

John Burns publishes three free Building Market Intelligence e-mails each month: U.S., Local and Strategic. He helps real estate executives develop and execute strategic plans, conduct market research and maximize profitability. His website is www.realestateconsulting.com.