Study: Homebuyers Facing Overvalued Markets Despite Prices Moderating
Housing prices are starting to stabilize across the country, though homebuyers waiting for a break in the market may not find it anytime soon, according to researchers.
Housing prices are starting to stabilize across the country, though homebuyers waiting for a break in the market may not find it anytime soon, according to researchers at Florida Atlantic University and Florida International University.
Price increases have lessened month-to-month in areas like Seattle, where prices only increased about .2 percent, Charlotte, North Carolina, .3 percent, and only .4 percent in Portland, Oregon. Jacksonville and Phoenix saw slight price declines of .03 percent.
“Prices are still moderating in the majority of the country, especially east of the Mississippi,” noted Ken H. Johnson, Ph.D., real estate economist at FAU’s College of Business. “There’s not much price movement. But, once you go west, you see some price declines.”
Despite the beginning stages of a moderation in housing prices, markets throughout the country remain significantly overvalued compared to their long-term pricing trends.
It’s a sign that it could be years before prices return to where they should be, and buyers are no longer paying a premium for a home.
Atlanta remains the most overvalued market in the country, with buyers paying an almost 48 percent premium. Next highest is Detroit where homes are 45.88 percent overvalued; Tampa, 43.09 percent; Memphis, Tennessee, 42.65 percent; North Port, 42.59 percent; Cape Coral, 42.18 percent; and in Charlotte, North Carolina, 41.63 percent.
In Miami, an area that shows little signs of a decline, homes are 38.73 percent overvalued.
The full ranking can be found at the Beracha and Johnson Housing Market Ranking.
“There’s some concern in buying if you are looking to resell in a short time. But, if you are planning on staying in the home for several years, purchasing should perform as well in terms of wealth creation as renting and re-investing,” said Eli Beracha, Ph.D. of FIU’s Hollo School of Real Estate. “For example, in Miami, there’s no reason to suspect a crash in prices as witnessed 15 years ago when the average property lost upwards of 60 percent in its value. Supply and demand are completely different this time around.”
Each month, FAU and FIU rank the 100 most overvalued metro areas using publicly available data from online real estate portal Zillow or other providers. The data, which extends from January 1996 through the end of May, includes single-family homes, townhomes, condominiums and co-ops.
The ranking is part of FAU’s Real Estate Initiative, a collaboration of professors at FAU, FIU, Florida Golf Coast University and University of Alabama to help the average consumer make informed decisions about housing. The initiative releases three monthly indices looking at rent prices, housing prices and whether market conditions favor buying or renting.
Some markets, like those on the East Coast and in Sun Belt states, are remaining overvalued because of their price-to-rent ratios. A higher return on rents indicate that prices will likely stay stable, while a lower return on rents suggests the opposite.
For example, Miami offers homeowners a 7.45 percent return on gross monthly rents, while El Paso, Texas offers an 8.9 percent return and New Orleans an 8.33 percent return. The higher returns indicate that the prices in these markets will stay well supported.
“Higher returns from rent in the eastern half of the US help explain recent price performance differences between the western and eastern halves of the country,” Johnson said. “These high gross returns can be calculated from a metro’s price-to-rent ratio by simply inverting the ratio. In general, prices are probably going to be well supported in most of the Sun Belt states.”
-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.