Philadelphia-area home values continued to show a less precipitous decline than other major metropolitan areas in the first quarter, a new study indicated yesterday.

Global Insight Inc., the Lexington, Mass., economic- forecasting service, said home prices in the eight-county region were about 4.1 percent above what they should be, given population density, relative income levels, interest rates, and historically observed market premiums or discounts.

James Diffley, managing director of Global Insight's Regional Services Group, said this made Philadelphia "fairly valued."

In the first quarter of 2007, prices were overvalued 10.1 percent. The difference in median price year over year is just $1,100, to $235,200 from $236,300 in the first quarter of 2007.

Credit the Philadelphia suburban market for the relatively good numbers, said Kevin Gillen, an economist at the University of Pennsylvania's Wharton School.

"The suburbs have held their value better than the city because only modest amounts of new construction took place there," he said. "So, when you average the suburbs with the city, things in the city can look rosier than they are."

Markets with prices 35 percent and higher over value are deemed at risk for price corrections. Even at the market's 2006 peak, Philadelphia prices were considered by Global Insight to be overvalued only 15 percent.

San Diego's peak prices were more than 35 percent overvalued; Miami's were 52.7 percent.

San Diego's prices are now undervalued 9 percent, while Miami's are still 27 percent above what Global Insight says they should be.

In the rest of the nation, "prices are being pushed down by fewer high-end sales and an abundance of foreclosed properties being sold at discount," said Jeannine Cataldi, Global Insight senior economist.

Tighter credit also is pushing down prices, she said.

Cataldi said that getting the market moving again meant cutting existing inventory. Figures from the Commerce Department yesterday showed that builders were adding little, as single-family construction fell in April for the 26th straight month.

It was, at 4.4 percent, the smallest percentage drop in six months, however. Multifamily construction was up for the third straight month, 0.4 percent.

Although the region is now "fairly valued," according to Global Insight, there is still too much overpriced inventory, brokers say.

Median asking prices are coming down slowly, but there remained a $38,000 gap regionally between what sellers wanted and what they got in April - $258,000 vs. $220,000, according to Prudential Fox & Roach HomExpert Report, using data from the Trend Multiple Listing Service.

Still, the difference between the two is much less than it was, and Gillen thinks that the number "implies [to me] that sellers are indeed 'getting it.' "

But only grudgingly, said Commerce Bancorp chief economist Joel F. Naroff.

"We didn't have a major run-up, but too many still believe their homes are fairly priced," he said.

Real estate brokers generally are seeing some progress.

"I think they have a long way to go, but we are training our agents to take listings at the right price and to get price reductions so the properties are listed more in line with the market," said David Krieger, senior vice president of Coldwell Banker Preferred.

"Last week alone, our Center City offices secured over 25 price reductions, so we are making progress," Krieger said.

Long & Foster regional vice president Art Herling believes that "only the sellers who really have to or want to move" were "getting it."

Sellers always have had lofty expectations, said Weichert Realtors' Blue Bell office manager, Scott Troxel, "but they do seem, however, to have adjusted to the post-2003 era, where they were expecting 28 percent appreciation."

"Now we're back to the more normal 'my home is nicer than my neighbors',' or 'I've invested $10,000 in custom wallpaper.' "

First Quarter Home Values

          Median     Over-   Metro       Price    valued

Area       (thousands)    (%)

N.Y.       $468.8    +0.5

L.A.        $432.2    +15.2

D.C.       $403.8    +24.6

S. Diego    $376.6    -9.0

Boston    $332.4     -13.1

Miami     $271.7    +27.0

Phila.     $235.2    +4.1

L. Vegas $232.6    -3.1

Phoenix $224.9    +20.0

Denver    $217.9    -6.7

Houston $120.0    -33.1

SOURCE: Global Insight Inc.   EndText

Contact real estate writer Alan J. Heavens at 215-854-2472 or aheavens@phillynews.com.