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The breakneck pace of home price growth nationwide has caused more markets nationwide to become overvalued, according to a new report from Fitch Ratings.
Fitch analysts estimate that home prices are 5.5% overvalued nationally as of the fourth quarter of 2020. Through November, national home prices were up some 8.9% since the start of the year, driving the overvaluation in the marketplace, they argued.
“Even though home price growth accelerated in 2020 due to low mortgage rates and demand/supply imbalance, the economy has not caught up,” the analysts wrote. As MarketWatch has reported, the demand among home buyers has far exceeded the inventory of homes for sale.
To some extent, this is a reflection of the fact that many homeowners are reluctant to list their homes for sale amid the pandemic. The imbalance between supply and demand is also the result of homebuilding activity remaining muted following the Great Recession and the preceding housing bubble.
Looking more locally, some housing markets are far more overvalued than others, the report noted. Fitch estimates that around 25% of metropolitan statistical areas (meaning major cities) around the U.S. are more than 10% over-valued.
Among the 20 largest metro areas nationwide, Las Vegas was the most overvalued, with Fitch estimating that home prices were overvalued by approximately 28%. Dallas-Ft. Worth was next, with Fitch projecting that prices were overinflated between 20% and 24%.
Fitch also examined which states had the most overvalued housing markets. Idaho led this list, with Fitch projecting that home prices there were overly elevated between 30% and 34%. Nevada was next.
Idaho has become a popular destination for transplants from California, particularly from San Francisco and Silicon Valley. The rise of remote working amid the pandemic has helped boost demand for homes in Boise, such that home prices there have risen upwards of 10% in recent years.
Other states whose housing markets were found to be overvalued in excess of 10% included Arizona, Texas, Kansas, North Dakota and Washington, among others.
Only 17 states were found to have housing markets where the homes were sustainably priced, according to Fitch’s analysis. Four states were rated as having undervalued housing markets: Connecticut, Illinois, Michigan and New Jersey.
The post This Is the Most Over-Valued Housing Market in America. Spoiler: It’s Not in California appeared first on Real Estate News & Insights | realtor.com®.
source https://www.realtor.com/news/real-estate-news/this-is-the-most-over-valued-housing-market-in-america-spoiler-its-not-in-california/
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