Home News UBS has released its annual house-price bubble report. Here are the most overvalued markets.

UBS has released its annual house-price bubble report. Here are the most overvalued markets.

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The housing market is itself in recession as mortgage rates have skyrocketed. If the economists’ consensus is correct for the existing home sales report due in the morning, sales are down 28% from their peak.

As such, UBS’s 7th Annual Global Real Estate Bubble Report differs from that released at the start of a period of recession rather than a wave of excess.

“Owners’ willingness to pay for the homes they live in could take a hit. This is not the most likely outcome as markets rarely plateau,” the report said.

UBS’s report is global, so only five US markets are analyzed: Miami, Los Angeles, San Francisco, Boston, and New York. The bad news is that all five are overrated. The good news is that none of the five are called bubble risks. UBS noted that, with the exception of Miami, other cities have not seen price increases as high as the national average. The report also warns that while income growth is very strong, the squeeze on affordability is likely to start to take its toll.

According to UBS, the most bubbled market globally is Toronto, followed closely by Frankfurt. Inflation-adjusted price levels in Vancouver and Toronto have more than tripled over the past 25 years.

“In such an overheated market, housing affordability has already been stretched so much that a recent rate hike by the Bank of Canada could be the final straw to break the camel’s back. Not only do new buyers and owners in negotiations have to pay higher interest rates, they also have to provide more income to qualify for a mortgage.

UBS rankings are based on five factors. Price to income, price to rent, change in his GDP share of mortgages, change in construction GDP share, relative prices between city and country.

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