CNN Model Does Remarkably Well in Housing Market Predictions

In 2006, CNN Money did a story ranking the top 299 housing markets according to how overvalued they were.  It could be inferred that those markets would see significant downward price adjustments these last few years.

Many Florida markets topped the 2006 list.  Las Vegas also ranked high on the list with a prediction of being overvalued about 50 Percent.  Florida and Vegas are now notorious for the steep housing declines that happened over the past four years.  In the 2006 report Philly was predicted to be overvalued about 15%.

This year CNN released new rankings showing the adjustments to the 300 or so markets and new average home values.  Many of the Florida markets did adjust down roughly the amounts they were predicted to be overpriced.  The same happened with Las Vegas.  Many Florida markets and Las Vegas are actually now undervalued.  Philly is also now on the undervalued list with a prediction of the market being undervalued about 3 percent.  The new rankings are great news, for many markets, if they are as good a predictor as they were in 2006.  While five years ago people would have been disappointed to be told their home values would only increase a few percent over the next few years, I think many Philly homeowners would now be happy with a slight increase in their home value.

 The new 2010 report did have bad news for homeowners in some markets.  As I blogged last week, attention is on Atlantic City.  This report predicted a 30% overvalue in its home values.  Ocean City, NJ was also on the list and predicted to be around 25 percent overvalued.