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. 

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. 

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. 

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