GOLDMAN: Here's The #1 Most Undervalued Housing Market In America

Earlier we mentioned how Goldman Sachs had constructed a new model to predict housing prices.

The model anticipates prices based on the following factors.

Long term factors

• Income: A 1% increase in per capita income is associated with a 0.61% increase in home values.
• User costs: Every 1% increase in user costs (taxes, maintenance, etc.) depresses values by 1.2%.
• Construction costs: The higher they are, the more expensive they are.
• Population: This matters, but only in areas where land supply is inelastic (like San Francisco or New York, as opposed to Dallas).

Short term factors

• Momentum.
• Mean reversion.
• Excess supply.
• Health of the mortgage market.

Anyway, the team -- lead by top economist Jan Hatzius -- published this chart to show which big metro areas are over and undervalued.

The cheapest? Vegas! Then Detroit. The hardest hit are now the best deals.