Report: US housing market is slightly undervalued

The US housing market is slightly undervalued, and prices have fallen 9.9 percent from their 2007 peak, according to the latest update of a report titled House Prices in America.

The report, which focuses on the fourth quarter of 2008, is a joint effort by IHS Global Insight, a Lexington-based company that specializes in economic and financial analysis and forecasting, and the PNC Financial Services Group.

"Nationally, prices fell by 13 percent at an annualized rate and dropped in 92 percent of the nation's metro areas - 302 of 330," the two firms said in a press release. "The rate of decline in the quarter was the greatest in the current housing cycle, the study said, and the rates of decline have exceeded the fastest appreciation rates of the bubble years of 2004 and 2005. Price contraction continues to be most severe in the Southwest and Southeast, areas of the country that had once been the most over-valued.

Nationwide, the housing market for single-family homes was undervalued by 8.4 percent at the end of the fourth quarter, the report said, and the Boston-Quincy market was undervalued by 17.3 percent; the median price for a single family home in the Boston-Quincy market at the end of the fourth quarter of 2008 was $317,300.

The study said that the US housing market is expected to decline further through 2009 "as consumers remain wary of taking on housing debt in these uncertain economic conditions."

James Diffley, group managing director of IHS Global Insight's Regional Services Group, said in a statement, "What is most worrisome about these sharp declines, and the general economic deterioration as 2008 ended, is that there is no sign of a bottom yet."
(By Chris Reidy, Globe staff)