Yesterday's sleeper metros

In the latest quarterly "House Prices in America" report released today by research firm Global Insight and financial holding company National City Corp., four of the top 10 overvalued metro areas in the nation in fourth-quarter 2006 were considered undervalued in the same quarter four years earlier.

Markets with an overvaluation rating of 35 percent or higher are considered at risk for price drops (which the report refers to as "corrections"). Madera, Calif., went from an overvaluation rating of negative 0.7 in fourth-quarter 2002 to a rating of 75.1 percent in fourth-quarter 2006 -- the fourth-highest level among 317 U.S. metro areas studied. (See Inman News report.)

Likewise, the Port St. Lucie-Fort Pierce, Fla., metro area was undervalued in fourth-quarter 2002, with an  overvaluation rating of negative 2.9 percent. In fourth-quarter 2006 the same area received a 61 percent overvaluation rating -- the seventh highest in the report.

The Riverside-San Bernardino, Calif., metro area and Yuba City, Calif., metro area had also gone from being undervalued in fourth-quarter 2002 to reaching the top-10 list of overvalued metro areas in fourth-quarter 2006.

All of the top-10 California metros that saw a major reversal in valuation over the past four years are inland areas. The coastal Port St. Lucie-Fort Pierce metro in Florida was battered by multiple hurricanes (Frances, Jeanne and Wilma) during this period and emerged as one of the most overvalued areas in the country.

Hurricanes had a much different effect on New Orleans, which owns the title as most undervalued metro in the nation, according to the fourth-quarter 2006 report. In fourth-quarter 2004 the New Orleans metro area had received an overvaluation rating of 9.2 percent in the study, though massive damage from Hurricane Katrina in late 2005 had sent that rating down to negative 68.5 percent in fourth-quarter 2005, which is substantially lower than the negative 38 percent rating the metro area received in fourth-quarter 2006.

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