Home prices in some of the worst-hit areas of the country have fallen far below pre-bubble levels, igniting concerns that properties in those markets are undervalued, according to analysis by Zillow.
Home prices in some of the worst-hit areas of the country have fallen far below pre-bubble levels, igniting concerns that properties in those markets are undervalued, the Wall Street Journal reported on its blog.
In a recent analysis, real-estate firm Zillow Inc. studied the correlation between home prices and annual incomes over the 15-year period that ended in 2000, before home prices began to surge.
For decades, price-to-income levels have moved in tandem, with a specific housing market's prices rising or falling in line with local residents' incomes. Many economists say that makes the price-to-income ratio a good gauge for determining whether housing is undervalued or overvalued for a given market.
Zillow found property prices in one-third of nearly 130 housing markets across the nation were undervalued, when compared with residents' current income and the pre-bubble trend.
The analysis underscores a broader point: While the nation's housing markets largely fell and rose together during the housing boom and bust, they aren't likely to hit bottom and begin recovery at the same time or pace. The Zillow analysis shows that many markets still appear to be overvalued.