National report suggests local housing market is overvalued

Carson City homes may be overvalued, according to a report released Thursday, perhaps confirming what many house hunters have noticed for several years.

Home sales declined 15 percent in the first quarter of 2006 over the previous year, but home prices have continued to rise, according to the Federal Deposit Insurance Corp.'s profile on Nevada.

Nevada homes appreciated 17 percent in Q1 2006 over the previous year. Sharply rising home values suggest that some markets in Nevada may be overvalued when analyzed over several years, according to the profile, which quoted a report conducted by the National City/Global Insight.

The "House Prices in America" report for Q1 2006 examines the ratio of median home prices to household incomes adjusting for market-specific population densities and other factors. That model determined that a single-family home in Carson City cost $291,000 in the first quarter, which is an overvaluation of 45 percent.

The study determines what home prices should be compared to income levels, which Assessor Dave Dawley said isn't the way the supply-and-demand market works. Carson City has a limited amount of land to build houses, so the price of land is higher and that drives costs up. Interest rates have been historically low in the last four years, driving up demand.

"In the past, houses were overvalued as far as the sale prices," he said. "Now they are becoming more reasonable. They are now where they should've been."

In Q1 2006, the average single-family home in Carson City sold for $348,000, according to city records. In 2005 it was $339,000.

Brent Holderman, president of Stewart Title in Carson City and Douglas County, said the high 17 percent appreciation is reflective of a booming 2005 market - which leveled off at the end of the year.

"It cranked through September and then the bottom dropped out a little bit," he said.

Holderman said the market is down in the Carson City area by nearly 20 percent, which has caused home sellers who put their homes on the market after September to lower prices.

"Most Realtors I speak to indicate that listings are selling only after price reductions from the high 2005 levels," he said. "Many of the developers we have spoken to are now offering incentives to sell their new-home inventory."

Weakening demand for homes doesn't worry Ron Trunk, chief executive officer of Citizens for Affordable Homes Inc. The nonprofit organization assists lower-income families with building homes.

"I would hope to see a slow down because to continue at a high rate is nuts," he said. "It's going to price everybody out of the market in a very short time."

National City Corp. (NYSE: NCC) is a financial holding company based in Cleveland. Its core businesses include commercial and retail banking, mortgage financing and servicing, consumer finance and asset management. For information visit www.nationalcity.com.

• Contact reporter Becky Bosshart at bbosshart@nevadaappeal.com or 881-1212.

The Nevada market in Q1 2006

• Nevada ranked No. 1 in the nation for job growth for the 13th consecutive quarter. State job gains have topped 6.2 percent, contributing to a decline in the unemployment rate to a 30-year low of 3.7 percent.

• The majority of new jobs came in the construction, leisure, business services and retail trade sectors.

• Per capita personal income of $36,530 remained just above the national average of $35,530.

• FDIC-insured financial institutions based in Nevada report solid earnings performance despite a recent narrowing of net interest margins.

• Commercial real estate and construction loan concentrations remain elevated, but past-due loan activity is low.

- Source: Federal Deposit Insurance Corp. State Profile