Naples, Fla. Tops List of Most Overvalued Housing

Naples, Florida, the seaside haven known for wealthy retirees and second-home buyers, held its spot atop the list of most overvalued U.S. real estate markets, according to a study released on Monday.

The quarterly U.S. Housing Valuation Analysis by Global Insight and National City Corp. found that overall, fewer metropolitan areas were considered overvalued in the fourth quarter as house prices fell in many regions.

An estimated 16 percent of single-family housing units were overvalued in the latest period, down from 17% in the third quarter.

The study examines the top 317 U.S. real estate markets, or 91% of the single-family housing market, to determine what home prices should be based on population density, relative income levels, interest rates, and historically observed market premiums or discounts.

Markets with valuation premiums above 35% are deemed overvalued and at risk for a price correction.

Some 57 of the top 317 U.S. metropolitan areas remained overvalued in the latest quarter, down from a revised 60 markets in the third quarter.

The greatest incidence of overvaluation was concentrated in pockets along the Atlantic and Pacific Coasts. New England, however, no longer appeared to be significantly overvalued, while Orange County, California; Tucson, Arizona; Reno and Carson City, Nevada; and Kingston, New York, also fell below the threshold denoting extreme overvaluation.

Naples remained the most overvalued market in the country, although its level of overvaluation declined during the period. Dallas and College Station-Bryan, Texas, remained virtually tied for the most undervalued markets, although home prices rose slightly in both markets.