OREANDA-NEWS. Fitch Ratings released today an update to a special report describing its Sustainable Home Price model. The model, originally released in 2011, associates movements in home prices with changes in underlying economic fundamentals such as income and unemployment, and is a key analytical component of the U.S. RMBS Loan Loss Model.

The model focuses on long-term dynamics and does not consider momentum or inflation rates, and so is not considered a home price projection, but is a point-in-time measurement of market equilibrium. Overall, the model currently evaluates prices nationally to be sustainable, though price growth over the last several years has pushed some regions into overvaluation.

In particular, home prices in areas of coastal California and Texas have experienced growth rates that exceed the growth rates of their underlying economic fundamentals. San Francisco, Los Angeles, Riverside, and Houston all are identified as more than 10% overvalued. Price momentum continues to be strong in these regions, but Fitch expects that price growth will need to moderate or correct as the economies continue to grow for home prices to regain long-term equilibrium.

Fitch's 'U.S. RMBS Sustainable Home Price Model" is available at 'www.fitchratings.com'.