Study: These Metro Areas are Most at Risk for Pricing Corrections
The Sun Belt states lead the nation in housing premiums significantly higher than the long-term pricing trends, suggesting the risk of a pricing correction is growing in these places, according to researchers at Florida Atlantic University and Florida International University.
The Sun Belt states lead the nation in housing premiums significantly higher than the long-term pricing trends, suggesting the risk of a pricing correction is growing in these places, according to researchers at Florida Atlantic University and Florida International University.
Twelve of the 15 most overpriced housing markets are in Sun Belt states, February data from the Top 100 U.S. Housing Markets shows. Atlanta leads the nation for overpriced cities, with homes 41.72 percent overpriced compared to the long-term pricing trends. It’s followed by Detroit, 40.20 percent; Cape Coral, 40.18 percent; Tampa, 38.38 percent; Palm Bay, 37.90 percent; Las Vegas, 37.78 percent; Knoxville, Tennessee, 37.72 percent; Lakeland, 36.51 percent; Orlando, 36.19 percent; Charlotte, North Carolina, 35.86 percent; Miami, 35.10 percent; North Port, 34.93 percent; Deltona, 34.73 percent; Memphis, Tennessee, 33.23 percent; and Worcester, Massachusetts, 32.64 percent.
“Home prices have become so out of line from their long-term trends that the risk of correction is rising,” said Ken H. Johnson, Ph.D., real estate economist with FAU’s College of Business. “While it’s unlikely prices will plummet dramatically, price performance could go flat for the future, or homes prices could see a slight decline even.”
The Top 100 U.S. Housing Markets, a monthly index released as part of FAU’s Real Estate Initiative, measures the difference in the actual average home price in a city and compares it to the long-term pricing trend for the city to calculate how overvalued (premium) or undervalued (discount) housing markets are in the nation’s largest metropolitan areas using publicly available data from Zillow.
Some of the metropolitan areas with the largest housing premiums are more at risk of a correction than they were leading up to the housing crash of 2007. Atlanta; Detroit; Knoxville, Tennessee; Charlotte, North Carolina; and Memphis, Tennessee all have housing premiums that are double or triple what they were before the peak of the last housing cycle.
“It appears that cities that had trouble with their pricing around 2007 are having trouble again, but nowhere near as bad,” Johnson said. “On the other hand, some cities that were fortunate enough to avoid a significant crash last time around are at greater risk today.”
With the risk of pricing corrections, researchers suggest that for many households renting and reinvesting the monies they would have otherwise put into homeownership might be the wiser option.
“It’s such a close call between renting and reinvesting or homeownership and building equity in a home in terms of wealth creation that there isn’t a single call to only rent or only buy,” said Eli Beracha, Ph.D., director of the Hollo School of Real Estate at FIU. “While renting and reinvesting seems to be the wisest choice, homeownership is a close second at this point. However, renting and not reinvesting is wealth destroying and should never be considered as an option.”
To compare housing premiums in any metropolitan area, click here.
-FAU-
Latest News Desk
- FAU Researcher Lands Grant for Personalized Cancer Radiation TherapyThe project, led by Wazir Muhammad, Ph.D., will employ AI, specifically deep reinforcement learning, to analyze multimodal data, improving cancer characterization and treatment for better patient outcomes.
- FAU/Mainstreet Poll: Harris Narrows Trump's Lead to 5 PointsNew FAU poll highlights current voter leanings that were examined immediately before U.S. President Joe Biden announced he was leaving the race.
- FAU's Executive MBA Among Top 50 MBA ProgramsFlorida Atlantic University's College of Business Executive MBA program was among the Top 50 Executive MBA programs in the country, according to 2024 rankings from Fortune.
- FAU Online MBA Program Climbs in RankingsFlorida Atlantic University's College of Business climbed up in the rankings for the Top 50 Online MBA Programs in the country, according to the 2024 rankings from The Princeton Review.
- National Poll Shows Small Trump Bump Post-Assassination AttemptA new poll of the battleground states of Georgia and Virginia highlights current voter leanings that were examined immediately before and after the attempted assassination of former U.S. President Donald Trump.
- FAU Nursing Faculty Named Fellows of the American Academy of NursingThree faculty members in the Christine E. Lynn College of Nursing have been named 2024 Fellows of the American Academy of Nursing for their extraordinary contributions to improve health locally and globally.