Overvalued?

Residential prices in the Reno-Sparks area are overvalued by nearly 43 percent, a figure that indicates the market is set for a correction, says a team of national researchers.

Real estate executives say the correction already has begun, although continued population growth and a strong local economy keep the northern Nevada residential market solid.

Prices of existing homes have stabilized, executives say, and some careful price-cutting has occurred at some of the new subdivisions that had long waiting lists 18 months ago.

The study by economists at National City Corp. and Global Insight found that the over-valuation of homes in Reno steadily rose during the past three years.

As recently as late 2001, the economists said, housing prices in Reno

appeared to be nearly 12 percent undervalued. Beginning in 2003, prices rose to a point where they were overvalued by 4 percent. A year later, they were overvalued by 24 percent before rising to 42.8 percent overvaluation at the end of 2005.

The researchers create their data with a model that uses income levels, population density, interest rates and the history of pre-miums or discounts in a local market.