As home prices have continued to rise across the country, particularly in the West, a new study suggests prices are ‘on the verge of flattening’ in five of the country’s ‘most overvalued markets’. country.
These markets include two cities in Utah and several other metros in Idaho, Texas and Arizona.
That’s according to a study released this month by professors at Florida Atlantic University and Florida International University.
Where do house prices peak?
- A price “crown” is developing in the five most overvalued markets: Boise, Idaho; Austin, TX; Ogden and Provo, Utah; and Phoenix,” says a Florida Atlantic University paper published Dec. 2. “This is an indication that home values in these areas may be stabilizing.”
“A price crowning is common when markets hit the peak of their current housing cycles,” said Ken H. Johnson, a real estate economist and associate dean at Florida Atlantic University’s College of Business, one of the researchers who led the study. “It looks like several parts of the country are at an inflection point.”
- In September, researchers at Florida Atlantic and Florida International universities ranked Boise, Idaho as the No. 1 “overvalued” housing market in the nation, calculating that premium home buyers were paying in the 2021 market at 80, 6%.
Three cities in Utah and other western metropolises rank just behind Boise. Here’s how the top 10 rankings broke recently, according to the university’s online tool.
- Boise, Idaho, where homes are selling at a premium of 80.51%.
- Austin, Texas, with a premium of 57.13%.
- Ogden, Utah, with a premium of 54.46%.
- Provo, Utah, with a premium of 49.18%.
- Phoenix, at a premium of 48.94%.
- Spokane, Washington, at a premium of 47.61%.
- Las Vegas, with a premium of 47.42%.
- Detroit, with a premium of 47.28%.
- Salt Lake City, with a 47% premium.
- Atlanta, with a premium of 45.17%.
- “The danger of buying in an overvalued market is that you may need to own the home longer to realize significant financial returns,” said Eli Beracha, professor of real estate at Florida International University. “Once prices stabilize, reselling the property for a higher return is very difficult.”
Housing Market Forecast 2022
While the Florida research may give hope to those aspiring to buy a home in the West, other predictors don’t see some Western markets slowing toward 2022.
- Boise’s projections rank just behind Salt Lake City with a forecast of 12.9% year-over-year sales growth and 7.9% year-over-year price growth.
That’s even though Utah and Idaho have already had banner years as the Western housing market continues to rage. In Utah, experts have warned of a “severely unbalanced” housing market as demand continues to dramatically outpace supply.
Although the housing market has cooled slightly heading into fall and winter – a typical seasonal pattern – housing experts are not predicting a market crash or seeing any indicators of a ‘bubble’. under current market conditions.
- Unlike what led to the stock market crash of 2007 that spurred the Great Recession – when the United States oversized housing and lending practices leading to a subprime mortgage crisis – housing experts say demand continues to outstrip supply, especially in fast-growing regions like Utah, Idaho, and other western states.