Home News House Prices Are Falling in These Five Overvalued Cities

House Prices Are Falling in These Five Overvalued Cities

by admin
0 comment

The booming housing market is finally starting to slow as soaring house prices, rising mortgage rates and a shortage of inventories cause demand to decline. But after a year of his double-digit price gains, the market is still vastly overvalued, even as prices start to fall.

According to the latest data by Moody’s Analytics, home prices are now more than 25% above long-term fundamentals at the national level. This is the highest level of record keeping in over 30 years.

These are the five metropolitan areas with the most overvalued home prices.

  1. Boise, Idaho (76.9%)
  2. Nashville, TN – Davidson – Murfreesboro – Franklin (63.1%)
  3. Austin, TX – Round Rock (61.1%)
  4. Las Vegas – Henderson – Paradise, Nevada (59.2%)
  5. Phoenix-Mesa-Scottsdale, AZ (57.5%)
A neighborhood in California is shown in this file photo. Home prices are starting to fall as demand declines, but the US housing market is still heavily overvalued.
Frederick J. Brown/AFP via Getty Images

But there’s good news in this seemingly grim list. These regions have been the most overvalued in the U.S. for some time, but prices in these cities have “little changed” between the first and second quarters of this year. of this year, according to Moody’s.

the price increase Boise, Austin, Las Vegas and Phoenix said year-over-year, “many potential buyers are increasingly burdened with monthly mortgage payments.” And in some of the most overvalued regions, prices have already begun to fall significantly.

According to Redfin, nearly 70% of homes listed for sale in Boise have already dropped in value in July. From June to July, Phoenix’s average home price fell 2.8%. According to Las Vegas Realtors, average Las Vegas home prices fell by $15,000 to $465,000 in July, the second straight month of decline.

in July, Realtor.com reported that 32.4% of listings were downgraded in the Austin housing market, with the median home listing price reaching $620,000.

Nationally, 32% of homes reported price drops in July compared to 27% in June.

“The past two years of sharp price increases and higher funding costs have driven down affordability and are beginning to reverse price gains in some of the most overvalued markets,” Moody’s said in a report. .

This decline in home prices caused by the affordability crisis experienced by many potential homebuyers across the country is happening slowly, but there is no denying it is underway.

The latest Federal Housing Finance Agency Home Price Index (FHFA HPI), released Aug. 30, shows that overall U.S. home prices will rise 17.7% in the second quarter of 2022 compared to the same period in 2021. Did. It shows that the housing market ‘correction’ that many analysts were predicting is actually happening. Home prices rose just 4.0% from April to June.

The upcoming correction in house prices is widely expected to be even more severe than experts previously predicted.

“We have lowered our expectations of price declines,” said Mark Zandy, chief economist at Moody’s Analytics. Newsweek“Previously, we expected home prices across the country to stay flat. [next year], which is now expected to fall by as much as 5%. ”

“The biggest surprise is how precipitously home sales have fallen. Both new home sales and existing home sales have fallen very sharply,” he said.

“I expected them to fall, but not as fast as they have. And it shows how hard mortgage rates have hit affordability,” he said. I think… But even for investors, they stop buying and wait for the price to drop to get a better opportunity,” he added.

Zandi estimates that home prices could fall 5-10% over the next year in overpriced markets like Boise and Phoenix. In the event of a recession, an overvalued market could fall -15% to -20%.

You may also like