Greater Boston's housing market 'undervalued' by 16 percent, forecaster contends
OK, here's more fuel for our housing price debate.
After years of declining prices, IHS Global Insight sees evidence that home prices may be finally showing some signs of stability, even as it cautiously notes still "dire" economic conditions.
In fact, the Lexington-firm contends the price correction has swung so far from the excesses of the bubble years the nation's housing market is actually "undervalued" now.
And that, in the firm's view, definitely includes the Boston, which IHS argues has swung from being 15.6 percent "overvalued" in 2005, the peak of the housing bubble, to 16.3 percent "undervalued" now.
Basically, that represents a shift in the median home sale price for the Boston area from more than $362,000 back in 2005 to just over $316,000 today.
It's certainly not a view that will win many votes on this blog, but it may not be as out there as it seems, as I will argue later.
If nothing else, it's provocative.
Overall, IHS Global Insight contends the entire U.S. housing market is now undervalued by more than 8 percent. While 52 metro markets were "extremely overvalued" back in 2005, none fit into this bloated price category today.
The calculation of undervalued versus overvalued, according to the firm, includes factors ranging from population to median income.
IHS also highlights a pair of recent studies that show a modest uptick in home prices across the U.S.
For starters, IHS reports that housing prices across the country stopped their two year slide in the third quarter, edging up by .2 percent over the second quarter.
And prices also rose year-over-year in the third quarter by nearly 1 percent, the Federal Housing Finance Agency recently reported, IHS notes.
The argument that U.S. home prices are now undervalued is attracting its share of rocks, not surprisingly.
And the idea that Boston area home prices are undervalues - by more than 16 percent no less - surely sounds absurd to many prospective buyers out there.
Even after three to four years of falling prices, Boston area home prices are still a stretch for many buyers.
Yet it is the higher income buyers who have been increasingly calling the tune in this market.
And they will do so again - and with a vengeance - as the economy recovers.
If you look at it in that context, then the idea of labeling Boston area home prices as "undervalued" sadly starts to make some sense.
