Jesse Williams – 5 Markets Are

15 Markets Are 50% Overvalued, New Report Finds

By Jesse Williams

As home prices have shown no signs of slowing through the first half of the year, researchers who have been tracking so-called “overvalued” housing markets since 2020 are warning that some metros have become “a risky bet” as their methodology shows a dangerous disconnect between historical trends and current prices.

“If we’re not at the peak of the current housing cycle, we’re awfully close,” says Ken Johnson, an economist at Florida Atlantic University (FAU) leading the initiative. “Recent buyers in many of these cities may have to endure stagnant or falling home values while the market settles—and that’s not what they want to hear if they had planned to resell anytime soon.”

Four markets are more than 60% overvalued, according to the latest rankings, while 11 others are 50% overvalued.

Researchers have emphasized that although there is a possibility that an almost inevitable pullback will be “painful for many consumers” who bought at the top, market conditions are nothing like 2006, and a full-on crash is unlikely.

“In the prior downturn, many homes lost half of their values, but I don’t think we’ll see anything close to that this time around,” says Eli Baracha of Florida Atlantic University, who also leads the project.

Location, Location, Location Because the methodology used is based mostly on historical trends, big, expensive metros like New York and San Francisco do not score highly as “overvalued,” according to the researchers. Instead, most of the regions that top their rankings end up being Mountain West, Sunbelt and Southern cities that have only recently become hot spots as they have vastly exceeded their long-term pricing trends.

Boise, Idaho, again topped the list of most overvalued markets, leveling off at 72.64% higher home prices than predicted. This is down slightly from a peak in February, when it hit 73.56%.

Boise’s pricing history suggests that homes should now cost an average of $299,202, although the typical buyer is paying $516,548, the researchers found.

Austin, Texas, came in second place at 67.70% overvalued, an increase of more than 2% from the month prior (65.50%)

Ogden, Utah, Las Vegas, Nevada and Atlanta, Georgia, rounded out the top five.

Five cities in Florida made the top 20, including Fort Myers, which jumped more than 6% (49.87% to 56.26%) to break into the top 10. Lakeland, Tampa, Sarasota and Melbourne made up the other Florida cities considered very overvalued— all above 45% higher than pricing trends.

Spokane, Washington, is the highest-ranked market in the Western Coastal states, overvalued by 56.25%, an increase of 2.64% from the month prior (53.61%). In the Northeast, no city cracked the top 50, with Rochester, New York, highest in that region at 63, 25.42% overvalued (up from 23.82%). Charlotte, North Carolina, topped the Atlantic coastal markets, 55.25% overvalued at rank 11 overall. RE

Jesse Williams is an associate online editor at RISMedia. Email your real estate news ideas to him at jwilliams@rismedia.com.