While a U.S. housing correction has started, home prices are still rising in many areas, according to the latest study from researchers at Florida Atlantic University (FAU) and Florida International University (FIU).
The average home price increased between September and the end of October in 64 of the 100 largest housing markets, including Chicago, Dallas, Memphis, Philadelphia and San Jose, California.
“We hear how slow the U.S. housing market is,” said Ken Johnson, a real estate economist in FAU’s College of Business. “But consumers are still buying and selling, and that activity is keeping prices elevated in a lot of metro areas.”
Johnson and Eli Beracha from FIU’s Hollo School of Real Estate analyzed long-term pricing trends back to 1996 in 100 markets to determine the most overvalued areas. The data coverd single-family homes, townhomes, condominiums and co-ops.
Cape Coral-Fort Myers is the nation’s most overvalued market, with buyers paying 67.48 percent more than they should, based on the market’s pricing history. Four other Florida markets are also in the top 10, along with Atlanta, Charlotte, Las Vegas, Ogden, Utah; and Boise, Idaho.
The full rankings with interactive graphics can be found here.
“Limited supply and strong demand continue to slowly push prices up in most of the country,” Beracha said. “However, there are many signs that we are nearing the peak of the current housing cycle in most metros. We are just not there yet.”
Prices are falling in 36 metros, including Boston, Denver, Las Vegas, Phoenix and Pittsburgh.
Johnson and Beracha said a better understanding of where a particular market is in its current housing cycle leads to more-informed decision-making on whether to buy or rent.
Most other housing studies analyze median home prices, but that can be misleading because the median only identifies the halfway point in all sales prices and does not control for varying property characteristics, Johnson said. What’s more, the median does not take into consideration percentage changes.
Using raw data from the Zillow Housing Value Index, Johnson and Beracha estimate an average home price, which shows a rise or fall in the average value. Additionally, the average percentage change can be mathematically estimated, providing a clearer picture of market performance.
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