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Top Overvalued Housing Markets in the United States

Top Overvalued Housing Markets in the United States

Home prices often diverge from a property’s actual value. In regions where real estate is thriving or housing supply is scarce, bidding wars can artificially inflate home prices. This leads to what credit rating agency Fitch Ratings refers to as “overvaluation.”

“An overvalued housing market occurs when home prices surpass what economic indicators would justify,” explains Maureen McDermut, a real estate agent with Sotherby’s International Montecito. “Factors like average income, population growth, and housing supply all influence home values. When housing prices significantly exceed these factors, the market is deemed overvalued.”

Nationally, home prices are reported to be 7.8% overvalued by Fitch. However, certain areas exceed this figure by a substantial margin (tripling the percentage in some metros). Coupled with the currently elevated mortgage rates, it becomes increasingly challenging to afford monthly payments.

Planning to buy a home soon? Let’s explore the regions where real estate is most overvalued and understand the implications for your homebuying goals.

Although Fitch indicates a recent reduction in overvaluation, data suggests that home prices in a staggering 88% of the country’s metro areas remain overvalued. Over half of the major markets are overvalued by 10% or more.

At the state level, Alaska, Arkansas, Hawaii, Kansas, Missouri, Montana, South Carolina, and Wisconsin are the most overvalued, with prices exceeding 15 to 19%.

On a metro level, the following seven housing markets are identified as the most overvalued across the country:

  • Buffalo, New York
  • Birmingham, Alabama
  • Indianapolis, Indiana
  • Kansas City, Missouri/Kansas
  • Milwaukee, Wisconsin
  • Raleigh, North Carolina
  • St. Louis, Missouri

It is evident that a considerable number of housing markets are currently overvalued. Consequently, if you are considering purchasing a property in the near future, you will likely encounter numerous risks associated with this endeavor.

Fortunately, by exercising patience, seeking appropriate assistance, and employing innovative approaches during your housing search, it is still possible to secure a favorable deal. Ultimately, this strategic decision has the potential to yield long-term returns on your investment.

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