“Wealth Creation Through Housing Is Not Guaranteed”: Behold, America’s Most Overvalued Housing Markets

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Are today’s boomtowns in danger of going bust?

A new report by researchers at Florida Atlantic University and Florida International University has examined which housing markets are most overvalued nationwide. Using third-party data, the researchers calculated the average house price in each of the 100 largest housing markets nationwide and compared the price fluctuations to what would be expected based on their historical growth. Based on this comparison, they determine how over- or undervalued a market is.

By January, housing premiums had risen in all markets surveyed, but one market far outpaced the others. Boise, Idaho was ranked as the most overvalued housing market nationwide, with buyers paying a premium of about 76% for those looking to buy a home there.

Boise has experienced a dramatic roller coaster ride in recent years. Before the pandemic, it was hailed as one of the hottest housing markets in the country as it began attracting transplants from expensive West Coast markets like San Francisco and Seattle. These buyers were attracted by the affordable property prices, stunning scenery and proximity to these technology hubs.

But over time, Boise’s competitive advantage has eroded as real estate prices have skyrocketed with this record demand. A similar story has also played out in the second most overrated city in the rankings: Austin, Texas, where buyers pay a premium of 62%. Here are the top 10 overvalued real estate markets according to the report:

market bonus

Boise, Idaho

76.4%

Austin, Texas

62.3%

Ogden, Utah

59.2%

Las Vegas

53.7%

Atlanta

52.3%

Provo, Utah

52.2%

Phoenix

52.0%

Spokane, Washington.

51.4%

Salt Lake City

49.7%

Detroit

48.3%

Some expensive markets have improved recently, the researchers noted. Specifically, they explain that “price crowns” developed in places like San Francisco and Los Angeles, suggesting they were headed for a downturn. But in most of these markets, prices have resumed their steady upward trend.

While there was no market nationwide that was undervalued based on these metrics, the places where homebuyers pay the lowest premium to complete a home are Honolulu (0.5%), Baltimore (0.7%) and New York (1.7%).

“If you set a house price now, it could take years for that investment to pay off.”


– Eli Beracha, director of the Hollo School of Real Estate at Florida International University

Given the overvaluation of the country’s housing stock, the researchers advised buyers to exercise caution. “We encourage buyers to aggressively negotiate or consider renting, even given the recent spike in rental prices,” said Eli Beracha, director of the Hollo School of Real Estate at Florida International University and one of the report’s co-authors, Learn .

“If you set a house price now, it could take years for that investment to pay off,” he added. “Temporarily high monthly rents could be viewed as a cost to avoid the vagabonds of an irrationally exuberant housing market.”

The researchers pointed to Miami as an example for their reasoning. During the market’s peak in late 2006, buyers there paid an average of almost $340,000 to buy a home. Only now are many of these buyers able to sell their home at a profit, they said, based on their analysis.

“With the dramatic swings we’re seeing now, the wealth creation from housing is not guaranteed, making home ownership a sometimes risky investment,” said Ken Johnson, an economist at Florida Atlantic University and the report’s second co-author, in the study .

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