As the residential real estate market continues to climb in value, many investors worry that they will end up paying too much for assets if they buy at the peak of the bubble. According to researchers from Florida Atlantic University and Florida International University, that danger is both real and present in a number of markets.
The two institutions recently released their list of the most overvalued markets in the country, which they identified by comparing estimated value of homes to the expected sales prices of those homes. Researchers used open-source data from Zillow and other real estate-data providers.
The results do not necessarily indicate that a city on this list is nearing a tipping point, and, in fact, many of the cities on the extended list also appear on lists of fastest-growing market as well. The analysts warned, however, that housing prices might flatten in these cities even if they do not fall.
The top five most overvalued markets in 2022 so far are:
- Boise, Idaho (by 76.39 percent)
- Austin, Texas (by 62.33 percent)
- Ogden, Utah (by 59.19 percent)
- Las Vegas, Nevada (by 53.68 percent)
- Atlanta, Georgia (by 52.34 percent)
Boise also appears on Realtor.com’s “20 Hottest Housing Markets,” where analysts predicted home prices would rise almost 8 percent in that city in 2022. Realtor.com analysts noted that remote workers are still flooding into Boise, and U.S. News placed it 11th on the “Best Places to Live” list for 2022. Austin appeared in the Realtor.com list of 2022 “Markets Seeing the Largest Jump in Rankings” with a “hotness rank” of 22. In 2021, Austin ranked 88th on the same list.
On a national level, Realtor.com predicts U.S. home values will rise by just 2.9 percent over the course of 2022. This is down dramatically from 2021’s 19.8 percent appreciation. Of course, it is important to note that the “cooling” still will include rising home prices, albeit not as astronomical as they have been over the last two years. Realtor.com economists Nicolas Bedo and Danielle Hale observed that a close proximity to a hot market certainly has the potential to extend a market’s run while inflating home values. They wrote, “When one area gains popularity, its neighboring cities become spillover markets that also absorb some of the demand,” concluding, “Around the country, smaller, outlying markets continued to rise [in March 2022].”