U.S. Houses are Undervalued Globally

According to a new report from London-based research firm Capital Economics, houses in the United States are nearly 20% undervalued when compared to global markets.

March 10, 2010

According to a new report from London-based research firm Capital Economics, houses in the United States are nearly 20% undervalued when compared to global markets.

  • States with homes most undervalued are California, Nevada, Michigan and Ohio.
  • States with homes most overvalued include Delaware, Montana and Oregon, plus Washington DC.

In many countries other than the U.S., the earnings-to-house-price ratio remained above the levels required to sustain a healthy mortgage market. In the United States, however, the economy is characterized by growing unemployment, a dip in net wealth and an aversion to taking on debt. The report adds that the tax credit that is most likely the cause for the late 2009 sales spike, and the resultant undervaluation.

Capital reports that 2009 prices nationally increased 3-6%, but will likely fall 5%, unless the tax credit is extended.

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