Demand for housing has risen very sharply this year, and that has affected prices. According to the carefully followed S&P CoreLogic Case-Shiller Indices, home prices nationwide rose 19.1% in October, compared to the same month last year. In several markets, the figure was over 25%.
No single factor has caused these increases. Certainly, low mortgage rates have contributed, although these have begun to rise. Tens of thousands of people have departed expensive coastal cities such as include New York and San Francisco, where home prices exceed twice the national median, for cities inland where prices have been lower. The ability to work from home, brought on by the COVID-19 pandemic, has allowed many Americans to become mobile.
Ironically, the move inland has caused prices to rise in cities people have found attractive for their new lives. Sharp increases in home prices have become part of bidding wars in which more than one buyer wants the same home. Some of these have meant homes stay on the market for just a few days.
Demand in recently desirable cities has caused home prices in them to become overvalued, compared to historical numbers. Florida Atlantic University’s College of Business has tracked the value of homes in these markets. The authors of this study, Ken H. Johnson, Ph.D., and Eli Beracha, Ph.D., “have developed a methodology to score the top 100 most overpriced or underpriced metropolitan cities in the U.S.” The results are based on a series of complex formulas that take into account home prices over a period of years.
The city that carries the largest premium for home prices is Boise, where it is 78.36%. This is well above the second-highest figure, which is Austin, with a 57.96% premium. No cities on either coast make the top 10 cities on the list. Tampa, which is ranked 15th, carries the highest premium of coastal cities at 39.94%.
These are the 10 most overpriced real estate markets in America:
- Boise City, Idaho (78.36%)
- Austin, Texas (57.96%)
- Ogden, Utah (55.94%)
- Phoenix, Ariz. (50.14%)
- Provo, Utah (49.81%)
- Las Vegas, Nev. (49.39%)
- Spokane, Wash. (48.94%)
- Atlanta, Ga. (47.53%)
- Salt Lake City, Utah (47.32%)
- Detroit, Mich. (47.23%)