Global Insight today released it’s analysis of data released by the Office of Federal Housing Enterprise Oversight (OFHEO), which covers both regional and national trends in residential real estate pricing. 

The main conclusion of the study is that the overall level of valuation is starting to ease nationwide.  Last quarter 66 metro areas were deemed “extremely overvalued”, whereas this quarter only 63 are.  This largely is due to price declines in some high value markets – 76 of the 317 metro areas surveyed experienced price declines during the quarter.  Nationwide, the average rate of appreciation for the quarter was 0.86% - significantly below the historical average. 

I thought the chart above was interesting – I took this from OFHEO data on the .gov website.  The cooling trend which accelerated last quarter continues.  National quarterly price appreciation topped 3% quite a few tiems over the past couple of years.  And note, these aren’t annualized numbers.  The peak was in Q3 2004 where the national index went up 4.44% in one quarter – that’s an annualized rate of 17.74%.  These, of course, are national averages – some metro regions were significantly higher. 

Real estate is local, but in a sense we’re all in the same economic boat so a soft landing will be good for the economy as a while.  But regardless of how it plays out, things will be tough for investors in a lot of markets for a while.  Look for shot sale opportunities as overextended homebuyers and speculative investors get squeezed out of homes with negative equity.

Regionally, most markets are within a few points of where they were when Global Insight last came out with their analysis last quarter, but interestingly four important bellweather markets (Las Vegas, San Francisco, Tampa and Washington DC) have inched their way back below the “extremely overvalued” threshold.