HOUSTON. – (By Dale King, Realty News Report) – Many housing markets are currently overvalued, but the nation’s upward rise in home prices isn’t over yet, according to real estate professors from Florida Atlantic University and Florida International University.
As of January 2022, price premiums were up from December 2021 in all 100 markets considered by the professors as “overvalued,” says a report issued by FAU’s Ken H. Johnson, and FIU’s Eli Beracha.
Only one Texas metro includes properties considered high on the “overvalued” list. That’s Austin, where prices in January were determined by the two professors to be 62.3 percent over the average. That places Austin as Number 2 on the top 100, behind only Boise, Idaho, the nation’s most overvalued market where homes are selling at 76.4 percent above the normal average price.
Meanwhile, Las Vegas and Atlanta are rising in the top 10, with both markets are more than 50 percent overvalued.
Each month, Johnson and Beracha rank the most overvalued 100 housing markets among America’s largest metros. They incorporate average or expected price changes and provide an estimate of how much a market’s housing stock is over- or undervalued, relative to its historic pricing.
While Austin homes have long been ranked high up on the “hot” price scale, three other Texas metros are just a tad over the expected selling price. San Antonio, which ranked 48thon the list, offers homes that are just 25.53 percent above average while Houston, at 53rd, is fairly cool among the hot 100 with home prices running 24.94 percent above where they “should be.”
The bargain basement community in Texas is down on the southern border. McAllen comes in at 17.69 percent over the pricing baseline.
Using the professors’ calculations, the best housing rate is far, far away, in urban Honolulu, where home prices are just .45 percent above the regular line. Two cities on the American East Coast also offer prices that deviate little from the mean – Baltimore, .72 percent above normal and New York City, 1.66 percent over the expected price level.
“With the dramatic fluctuations that we’re seeing now, wealth creation through [purchasing a home] is not guaranteed, making homeownership a sometimes risky investment,” said Johnson, an economist with FAU Executive Educationin the College of Business.
If the market were experiencing only moderate fluctuations, “people could buy, regardless of the point in a housing cycle, and know that within a few years their ownership would create noticeable wealth.”
While home prices don’t appear to be abating, the professors said that two months ago, “pricing crowns” were developing in Los Angeles, San Francisco and other Western metros – “an indication that the long-anticipated housing slowdown was starting.” Today, however, prices have reaccelerated in all but a few of those big Western municipalities.
The Florida educators noted that “in none of the 100 markets are homes considered undervalued, based on historical pricing. The data, which extends from January 1996 through the end of January 2022, includes single-family homes, townhomes, condominiums and co-ops.”
Ideally, housing values fluctuate moderately around a long-term, upward-sloping pricing trend, according to Johnson. Over time, moderate fluctuations have made homeownership a wealth-generating engine for millions of middle-class Americans.
Johnson and Beracha say the next few months are crucial for housing markets across the country.
“We encourage buyers to negotiate aggressively or to consider renting, even in light of the recent surge in rental rates,” said Beracha, of FIU’s Hollo School of Real Estate. “If you lock in a home price now, it could take years to see the return on that investment.”
“Temporarily high monthly rent could be viewed as the cost of avoiding the vagaries of an irrationally exuberant housing market,” he added.
The professors said they produced their results using figures from Zillow and other data providers.
Some real estate price prognosticators have advanced the idea that mortgage rates will stabilize the price of homes for sale in overheated housing markets across the nation.
It hasn’t happened yet, say researchers from Florida Atlantic University and Florida International University.
Some experts believe the conflict in Ukraine and a flight to the perceived safety of bond investing, will translate into lower mortgage rates in 2022.
Freddie Mac’s weekly mortgage survey showed that 30-year fixed-rate mortgage averaged 76 percent for the week ending March 3, 2022, down from the prior week when it averaged 3.89 percent. A year ago at this time, the 30-year mortgage averaged 3.02 percent.
March 5, 2022 Realty News Report Copyright 2022
File: Home Prices Haven’t Peaked
Photo: Ralph Bivins, Realty News Report Copyright 2022
File: FAU. FIU. Home Prices Haven’t Peaked Yet 3-5-22. Ken H. Johnson. Eli Beracha