The white-hot U.S. housing market is finally showing signs of cooling. The number of new residential construction permits has been falling in recent months, as inflation has surged to a 40-year high and interest rates have spiked.
On June 15, the Federal Reserve hiked its benchmark interest rate by three-quarters of a percentage point, the biggest single increase since 1994, in an effort to quell rising prices. The rate increase means that lending services are going to further increase mortgage rates. With the cost of taking a mortgage increasing, that could put a dent in demand for homes. (Rising mortgage rates cost homebuyers at least $100K in every state.)
But after years of low interest rates and robust demand for housing during the coronavirus pandemic — as families took advantage of lockdowns to relocate — homes are wildly overpriced in many popular markets.
According to researchers from Florida Atlantic University and Florida International University, 15 of the 100 largest metropolitan areas have housing markets that are so overvalued that the cost of a home is 50% or higher than the expected price based on local long-term pricing trends.Â
To identify these 15 markets, 24/7 Wall St. reviewed the noted research, Top 100 U.S. Housing Markets. The researchers used data from Zillow, specifically the Zillow Home Value Index, and a series of complex formulas that take into account home prices over a period of years to find the premium or discounts of home sales prices over expected prices for the 100 cities. Based on the research, we ranked cities by their premium, as April 30, 2022.Â
In Phoenix, Arizona, the average sale price of a home is about $171,000 above the expected price of $466,170. Less than a decade after Detroit filed for bankruptcy, the average sale price of a Motor City home is $238,278, well above the expected average price of $157,631.Â
Out of these extremely overvalued housing markets, three are in Florida and three are in Utah. North Carolina has two: Raleigh and Charlotte. (This is the state with the most foreclosures.)
Here are the 15 cities with the most overpriced housing markets
Source: Sean Pavone / iStock via Getty Images
15. Detroit, Michigan
> Premium: 51.2%
> Average sale price: $238,278 — #15 highest
> Expected price: $157,631 — #15 highest
[in-text-ad]
Source: Kruck20 / iStock via Getty Images
14. Raleigh, North Carolina
> Premium: 51.7%
> Average sale price: $445,219 — #8 highest
> Expected price: $293,494 — #7 highest
24/7 Wall St.
Source: SeanPavonePhoto / iStock via Getty Images
13. Tampa, Florida
> Premium: 52.4%
> Average sale price: $366,059 — #13 highest
> Expected price: $240,175 — #11 highest
Source: Sean Pavone / iStock via Getty Images
12. Lakeland, Florida
> Premium: 53.2%
> Average sale price: $297,636 — #14 highest
> Expected price: $194,252 — #14 highest
[in-text-ad-2]
Source: Kruck20 / iStock via Getty Images
11. Charlotte, North Carolina
> Premium: 55.3%
> Average sale price: $372,300 — #11 highest
> Expected price: $239,804 — #12 highest
Source: DenisTangneyJr / E+ via Getty Images
10. Salt Lake City, Utah
> Premium: 55.8%
> Average sale price: $602,765 — #1 highest
> Expected price: $386,998 — #1 highest
[in-text-ad]
Source: ChrisBoswell / iStock via Getty Images
9. Spokane, Washington
> Premium: 56.3%
> Average sale price: $446,126 — #7 highest
> Expected price: $285,528 — #8 highest
24/7 Wall St.
Source: CampPhoto / iStock via Getty Images
8. Fort Myers, Florida
> Premium: 56.3%
> Average sale price: $404,770 — #10 highest
> Expected price: $259,043 — #10 highest
Source: Sean Pavone / iStock via Getty Images
7. Provo, Utah
> Premium: 57.0%
> Average sale price: $585,024 — #3 highest
> Expected price: $372,569 — #2 highest
[in-text-ad-2]
Source: 4kodiak / E+ via Getty Images
6. Phoenix, Arizona
> Premium: 57.9%
> Average sale price: $466,170 — #6 highest
> Expected price: $295,165 — #6 highest
Source: Kruck20 / iStock via Getty Images
5. Atlanta, Georgia
> Premium: 58.0%
> Average sale price: $367,946 — #12 highest
> Expected price: $232,867 — #13 highest
[in-text-ad]
Source: f11photo / iStock via Getty Images
4. Las Vegas, NV
> Premium: 61.5%
> Average sale price: $437,478 — #9 highest
> Expected price: $270,912 — #9 highest
24/7 Wall St.
Source: DenisTangneyJr / iStock via Getty Images
3. Ogden, Utah
> Premium: 64.7%
> Average sale price: $535,818 — #4 highest
> Expected price: $325,264 — #4 highest
Source: RoschetzkyIstockPhoto / iStock via Getty Images
2. Austin, Texas
> Premium: 67.7%
> Average sale price: $594,441 — #2 highest
> Expected price: $354,474 — #3 highest
[in-text-ad-2]
Source: vkbhat / E+ via Getty Images
1. Boise City, Idaho
> Premium: 72.6%
> Average sale price: $516,548 — #5 highest
> Expected price: $299,202 — #5 highest
Essential Tips for Investing: Sponsored
A financial advisor can help you understand the advantages and disadvantages of investment properties. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
Investing in real estate can diversify your portfolio. But expanding your horizons may add additional costs. If you’re an investor looking to minimize expenses, consider checking out online brokerages. They often offer low investment fees, helping you maximize your profit.
Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.