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
- Researchers Identify Most Efficient Reinforced Concrete Beam DesignAn FAU engineering professor and international collaborators from Metallurgical Institute in Ukraine and Ariel University in Israel, have identified the most efficient design for reinforced concrete beams.
- FAU Launches Emergency Medical Services FellowshipFAU's Charles E. Schmidt College of Medicine launched it's sixth fellowship to strengthen emergency care through Boca Raton Regional Hospital - part of Baptist Health - and fire-rescue partnerships.
- FAU Receives NIH Grant to Investigate Amphetamine AddictionWith this grant, the FAU research team will use tiny roundworms to study how amphetamines disrupt dopamine, aiming to uncover addiction mechanisms and train the next generation of neuroscience researchers.
- New Study Links NP Autonomy to Provider Shortage ReliefA new study from researchers at FAU highlights how temporary expansions in nurse practitioner (NP) autonomy during the COVID-19 pandemic helped alleviate shortages.
- FAU's Cheryl A. Krause-Parello, Ph.D., Awarded Fulbright U.S. ScholarCheryl A. Krause-Parello, Ph.D., received a Fulbright U.S. Scholar award to study Germany's research and education systems in the academic year 2025-26, focusing on funding and university support for research.
- BEPI Poll: Hispanic Economic Optimism FallsHispanic consumers are spending less as optimism about their economic outlook dwindles amid inflation and economic uncertainty, according to a poll from the Business & Economics Polling Initiative at FAU.