Of the 100 housing markets in the United States, this is the least overvalued, according to a study

Baltimore is the least overvalued housing market, a new study reveals.

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Home prices have risen rapidly in the past year, even as mortgage rates are rising and pros say they’re likely to go higher (see the lowest mortgage rates you may qualify for here). But some markets are now much more overvalued than others, according to researchers Ken H. Johnson, associate dean of graduate programs at Florida Atlantic University, Eli Beracha, director and professor at Tibor, and the Sheila Hollo School of Real Estate at Florida International. University.

They developed a methodology, using Zillow data, to rate the 100 most expensive and most expensive metropolitan cities in the United States. “For all 100 markets, we use monthly data from the Zillow Home Value Index (ZHVI) to develop the long-term trend of home prices, and from there, we estimate the expected median price of a market and compare this estimate with the actual ZHVI values: the premium is the percentage between the two numbers,” says Johnson.

The first thing to note is that all of the 100 largest metro areas were sold at a premium, but for some that premium is extremely small. In fact, their data shows that Baltimore homes are selling at the lowest premium, with buyers paying only a 2% premium for real estate. It is followed by picturesque Honolulu at 2.11% and New York City at 2.83%.

Less Undervalued Real Estate Markets

Market

Premium

Baltimore

2.03%

urban Honolulu

2.11%

New York

2.83%

Washington D.C.

3.26%

virginia beach

3.46%

stamford

7.69%

red baton

8.05%

New Orleans

8.33%

albany

8.54%

Hartford

9.19%

So why isn’t housing in these markets selling for a higher price? Johnson says this can be traced back to the last housing recession, when these were some of the hardest-hit metro areas in terms of price declines. “These and other hard-hit markets like Miami seem to have learned and resulted in more aggressive price negotiations by locals. Kind of, fool me once, shame on me, fool me twice, shame on me,” says Johnson.

See the lowest mortgage rates you may qualify for here.

Meanwhile, in some markets, real estate is selling at a hefty premium, professionals say. At the top, Boise City, Idaho ranks as the most expensive metro area, with a premium of 75.18%. What makes that so? It may have something to do with people moving from more densely populated areas to places like Boise, which has steady population growth, as well as rising wages in the Mountain-West region and many outdoor amenities, all of which have made make places like Boise a safe bet for investors.

“For several months, Boise has been the most expensive real estate market in the US, making it the market most exposed to rejection. Therefore, it is reasonable to expect that rising mortgage rates will first lower prices and premiums in Boise,” says Johnson. The S&P CoreLogic Case-Shiller Home Price Index found that increased demand for second homes favored smaller cities, and in 2021, Boise saw real estate appreciate 22%, with an average increase of $64,000 in homeowners equity from December 2020 to December 2021.

The most expensive real estate markets

Market

Premium

city ​​of boise

75.18%

Austin

66.29%

Ogden, Utah

63.33%

Las Vegas

59.55%

atlanta

55.96%

Phoenix

55.5%

Spokane, Washington

54.72%

Provo, UT

54.32%

Salt Lake City

53.77%

charlotte

52.54%

“Supply and demand for housing units is the underlying driver of prices in all markets. While demand can change quickly, the supply of housing units can’t change that quickly, so once a market’s relative position in the ranking is established, it’s hard to change in a few months,” says Johnson. . What may be more important than a market’s ranking, however, is comparing premium performance today with that of the past. “Lessons can be learned,” says Johnson.

Of course, this isn’t the only list of overvalued real estate markets. CoreLogic looked at overvalued real estate markets in March. Not only did the company reveal that 2021 home price growth was up 15% from 2020, which is triple the average rate seen in the previous decade, it also found that many markets appear to be overvalued. In fact, he called Destin, Florida; Homosassa Springs, Florida; Prescott, Arizona; City of Lake Havasu, Arizona; Punta Gorda, Florida; Naples, Florida; and Austin, Texas. CoreLogic’s Market Conditions Indicator tool uses a benchmark to indicate whether home prices in a metro area are high compared to local household incomes, and if they are, the market is considered overvalued .

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