Tags: Your | Home | Overvalued?

Is Your Home Overvalued?

Thursday, 13 April 2006 12:00 AM

Ingo Winzer, president of Local Market Monitor, has devised an index of metropolitan areas and their overvalue/undervalue ratio, reports CNNMoney.com.

The index asserts that several cities in coastal states such as California and Florida have overvalued properties. Winzer says 40 out of the 100 cities in the index are overvalued. Twelve of the 40 are in California, with the Santa Barbara-Santa Maria area topping the list at 83% overvalued, according to Winzer. Nine of the top 10 overvalued cities are in California.

Fourteen of the 40 cities are in Florida. Naples is second on the list, with a 76% overvaluation. At No. 11, the Miami-West Palm Beach corridor is 55% overvalued, says Winzer.

These areas have been the hottest housing markets in recent years. If they return to "equilibrium," as Winzer puts it, prices could fall up to 70%.

The Journal tells the story of Todd Linsley, a real estate investor in Florida, who is having trouble selling a house he bought in Stuart, Fla.

David Berson, chief economist at mortgage giant Fannie Mae, tells the Journal: "In some places, prices might fall. In others, price gains will slow."

The most undervalued areas?

Try Texas. At 25% and 21% undervalued, El Paso and McAllen/Edinburg are the two cities ranking last on Winzer's list.

Memphis, Tenn., Fayetteville, N.C.; Little Rock, Ark., and Augusta, Ga., are the only other cities Winzer considers undervalued.

The United States may have narrowed its trade gap with China in March, but Uncle Sam is still spending more than the cupboard holds - and it doesn't bode well for the economy, Wall Street observers say.

The U.S. Treasury Department announced Wednesday that the federal government recorded a record $85.47 billion federal budget deficit in March. That's the highest number ever for the month of March.

"The March shortfall between government income and spending was up from a $71.21 billion deficit in March 2005," Reuters reports. "While it was a record for any March, it was less than the February 2006 monthly deficit that was a record for any one-month period, at $119.20 billion."

Wall Street analysts had predicted that the budget deficit number would be much lower - about $73 million. Treasury officials blame the high number on accelerated payments due in April that were actually made in March.

"Half of the growth in outlays is attributable to a $15 billion calendar shift in the timing of certain monthly recurring benefit payments (for example, Medicare) that accelerated April 2006 payments into March 2006," a department official explained.

The good news is that tax receipts were up, signaling that at least the U.S. government is taking in more money. Incoming receipts for March grew to $164.56 billion, up from $148.76 billion in March 2005.

You can't swing a dead yellow-bellied sapsucker without running into an investment speculator whooping it up over the impending bird flu bonanza.

Sure, there's been a big potful of money earmarked for Avian bird flu vaccines, both public and private. In March, Health and Human Services Secretary Michael Leavitt announced that the federal government plans to spend $3.3 billion on bird flu initiatives - about half of that on a vaccine.

And states are getting in on the act, too.

In Maryland, Governor Robert Erlich broke ground on a new bird flu vaccine laboratory in Rockville. The lab is capable of producing 150 million doses of flu vaccine annually.

Trust us, investors notice these things. Shares of Cel-Sci Corp. skyrocketed in early April after the small biotech company announced that its vaccine might be a stopgap measure to immunize people during the waiting period before a bird flu vaccine takes effect. The stock rose 22% on the news.

That's not an isolated incident.

Pennsylvania-based flu vaccine manufacturer Novavax saw its stock climb to a 52-week high last October after media reports that the bird flu epidemic had escalated in countries like Turkey, Romania and Russia and even Great Britain (where a lone parrot shipped from South Africa was found to have the disease).

BioCryst Pharmaceuticals of Birmingham, Ala. - which previously had a now-disbanded partnership with Johnson & Johnson to develop a vaccine - also saw its stock fly to new heights, hitting a five-year high of $18.42 a share in October on the same news that drove up Novavax's stock.

One of our favorite economists, Donald Luskin, has written a great deal on the investment opportunities in bird flu vaccines.

As Luskin and many scientists point out, if the H5N1 virus makes the expected transition from birds to humans, a pandemic could follow.

"If H5N1 makes the jump to human-to-human transmissibility, then watch out" says Luskin.

"People can stay away from birds. But they can't stay away from each other. And because H5N1 is so biologically unusual, the human race has no natural immunity to it." Luskin estimates that such a pandemic could take the lives of 16 million Americans - the equivalent of World War III.

Luskin has developed a useful benchmark to see exactly how biopharm companies are profiting from bird flu vaccine technologies. His "Avian Flu Index" is comprised of 21 companies engaged in developing vaccines, testing, therapies and non-fowl food production.

Since launching the index on Aug. 31, 2005, it is up a spectacular 64% through March 2006, far and away higher than the American Stock Exchange (Amex) Biotech Index, which was up a still-impressive 18% over the same period.

Alnylam Pharma

While Luskin says he will add more companies to the index as more companies get involved with bird flu vaccines, 64% is hardly chicken feed.

Perhaps that's why President Bush has asked for $7.1 billion in Avian bird flu vaccine spending to stockpile an antidote that could be given to all 300 million or so American citizens. Uncle Sam has already delivered $162 million in funding to many of the biopharm companies listed in Luskin's index. And more cash is on the way.

Random Roger, blogging on the investment site RandomRoger, blogspot.com, says don't be deceived by the tightening trade balance between the U.S. and China that was announced earlier this week.

Roger is bullish on the big Asian Tiger, pointing out that, when it comes to numbers, China is still the land of opportunity.

His numbers say that:

 •  80% of the world's cranes are now in China for all the skyscrapers being built

"I think this is a very simple theme to see coming," he says. "Any negative sentiment about manipulation, lack of information or anything else should not be discounted but chances are as the economy evolves, the currency strengthens and capitalism flourishes the stocks will do well."

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Ingo Winzer, president of Local Market Monitor, has devised an index of metropolitan areas and their overvalue/undervalue ratio, reports CNNMoney.com. The index asserts that several cities in coastal states such as California and Florida have overvalued properties. Winzer...
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Thursday, 13 April 2006 12:00 AM
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