The U.S. Housing Market Is Becoming Overvalued In 2021
25 Jun, 2021 by admin
It’s still shocking to think that home prices in the United States have risen by double digits over the past year. Not even a global pandemic and nationwide economic slowdown could halt that trend.
As a result of this rapid rise in prices, many are now wondering if the U.S. housing market is becoming overvalued.
According to a recent report, home prices across the United States are overvalued in many parts. That report came from the credit rating agency Fitch Ratings.
At the state level, Idaho was ranked as the most overvalued housing market in the U.S. Las Vegas, Dallas, and Phoenix were singled out at the metropolitan level. Home prices have risen sharply in all of these areas over the past year or so.
Report: U.S. Housing Market Overvalued by 8.2%
In April, Fitch Ratings published a report that suggested the U.S. housing market has become overvalued due to significant home-price gains. To quote their April 2021 report:
According to estimates by Fitch Ratings, national home prices rose by over 10% last year, the highest annual growth in over six years, and are now overvalued by 8.2% on a population-weighted average basis.
But like all things real estate-related, such conditions can vary greatly from one city or region to the next. In one-third of U.S. metropolitan areas, housing markets were said to be overvalued by 10% or more. According to the report, this is the result of home-price growth outpacing “underlying economic fundamentals” such as income growth.
According to Fitch, Idaho currently has the most overvalued real estate market of any U.S. state. The company reported that home prices in Idaho are 30% to 34% overvalued as of spring 2021. The state of Nevada took the number-two position, having a real estate market that is estimated to be 25% to 29% overvalued.
Arizona and Texas were also reported to have overvalued home prices by 15% – 19%.
According to the report, at the metropolitan level, Las Vegas, Dallas-Fort Worth, and Phoenix currently have the “frothiest” housing markets in the country. (It’s worth mentioning here that both Phoenix and Las Vegas were hit especially hard during the last housing boom-and-bust cycle.)