In this article, we will be analyzing the US housing market while covering the 20 most overpriced housing markets in America. If you wish to skip our detailed analysis, you can move directly to the 5Most Overpriced Housing Markets in America.
The US Housing Market: A Recap of 2023
The US housing market was subject to a rigid crisis in 2023. The home prices kept on rising while the existing supply of houses was not enough to cater to the high demand. On October 20, 2023, CNN reported that home sales hit a 13-year low in September 2023. A large proportion of would-be buyers were unable to attain a home due to soaring interest rates in addition to expensive houses. You can take a look at some of the overpriced housing markets in the US in 2023. Furthermore, the monthly payment on an average-priced home required 40% of the median household income. Another dilemma was that the existing homeowners held on to their houses since they had to pay a higher interest on a new house.
Real Estate Market Outlook for 2024
As reported by Forbes, many first-time homebuyers still remain out of the US housing market. The affordability concerns powered by the high mortgage rates and a serious shortage of inventory in 2023 continue to persist. Experts have referred to the pre-pandemic housing market as 'hot' while the 2023 market remained 'cold' due to the aforementioned issues. The 2024 market is better but still doesn't offer just the right conditions for homebuyers.
For the housing market to make a real recovery, certain conditions need to be met. Firstly, an increase in inventory is crucial to meet the high demand. Simultaneously, a cooling down of mortgage rates is necessary. An additional factor to consider in this regard is that quickly falling mortgage rates lead to soaring demand which ends up ruining the inventory gains in the market. Therefore, a rather steady decline over a longer period has been expected to favor the US housing industry.
A Probable Housing Market Rebound in 2024?
After a year of discouraging circumstances for homebuyers, the housing market appears to be offering something to look forward to. A positive builder sentiment was recorded in February which implies that these builders see improved conditions for new construction. Previously in January, new single-family building permits also experienced an increase.
Similarly, the spring housing market tends to especially depict positive conditions. On March 6, Fortune reported that an 18% increase in the number of homeowners who wished to sell their houses in the next 12 months was witnessed during a December 2023 Survey. The coming spring in 2024 could turn out to be a seller’s sweet spot if a stable or lower interest rate persists or newly constructed homes are available for them to settle in.
On March 6, CNBC also reported that the mortgage applications to buy a home have witnessed a rise. An increase in new listings has been considered a good sign for the spring buying season. During February, 14.8% more homes were seen actively for sale as compared to the same period in 2023.
Homebuilders to the Rescue
The US housing market offers various options to those seeking investments in real estate. Some of the largest homebuilders in the US that dominate the US housing sector include PulteGroup, Inc. (NYSE:PHM), KB Home (NYSE:KBH), and Lennar Corporation (NYSE:LEN). Let’s take a look at some of the most recent initiatives undertaken by these firms.
PulteGroup, Inc. (NYSE: PHM) operates Pulte Homes which constructs consumer-inspired homes and communities in more than 40 markets across the US. On March 6, PulteGroup, Inc. (NYSE: PHM) reported the grand opening of ‘Rookery Lane at Concord’ which is the company’s new Boston-area community. The community is situated such that it offers a convenient commute to Concord and Boston. Hiking trails and parks in the vicinity can also be enjoyed by the residents at Rookery Lane at Concord. Pricing for attached homes begins at $1,339,995.
KB Home (NYSE:KBH) is another dominant American home construction company that builds personalized homes as per the homebuyer’s budget. On March 1, the company reported the grand opening of its new community in San Jacinto, California. The community ‘Rancho Madrina’ allows residents to undertake recreational activities such as boating, fishing, hiking, mountain biking, rock climbing, and camping. Riverside County’s major employment centers can also be accessed. Prices for the new homes from KB Home (NYSE:KBH) start from the $490,000s.
Lennar Corporation (NYSE:LEN) is an American home construction company that constructs affordable, move-up, and active adult homes. The homebuilder is also involved in the development of high-quality multifamily rental properties. On March 7, Lennar Corporation (NYSE:LEN) reported the company’s plans for a master-planned Active Adult community for homebuyers aged 55 and above in northern Lancaster County. Model homes are expected to be completed in the summer of 2024. Downtown Lancaster can be easily visited by the residents of the community. Amenities such as a clubhouse, fitness center, pickleball courts, and sidewalks will also be offered.
Homebuilder stocks sorted by hedge fund sentiment have also been previously covered. Now that we have discussed what's going on in the US housing market, let’s move to the 20 most overpriced housing markets in America.
20 Most Overpriced Housing Markets in America
20 Most Overpriced Housing Markets in America
Our Methodology:
In order to compile a list of the 20 most overpriced housing markets in America, we sourced data from Beracha and Johnson Housing Market Ranking which ranks the top 100 markets in the country based on their overpricing or underpricing. A premium or a positive score represents an overpriced market and the fact that the average property in a market is selling above its historical implied price while a negative score represents an underpriced property market. The most recent data is available from January 2024. The 20 most overpriced housing markets in America have been ranked in ascending order of their home overprice percentages or premiums, representing the extent of overpricing.
20 Most Overpriced Housing Markets in America
20. Modesto, California
Home Overprice Percentage: 32.47%
The city of Modesto is positioned in the Central Valley and ranks as an overpriced housing market in the US. As of January, the city records a premium of 32.47% which indicates that the average Modesto list price is higher than the expected home price.
19. Phoenix, Arizona
Home Overprice Percentage: 32.58%
The capital of Arizona, Phoenix, ranks among the most overpriced housing markets in America. While the average list price in the city was recorded at $447,074 in January, its expected home value stood at $337,210.
18. Cleveland, Ohio
Home Overprice Percentage: 32.67%
Cleveland is another overpriced housing market in the US. The city is situated in Northeast Ohio. As of January 31, the Cleveland housing market is 32.67% overpriced.
17. Durham, North Carolina
Home Overprice Percentage: 32.71%
Durham is located in the east-central part of the Piedmont region and tends to be one of the most overpriced housing markets in America since the city’s average list price surpasses its expected home value.
16. Winston, North Carolina
Home Overprice Percentage: 32.75%
As of January 31, the average list price in Winston is $251,762 while the expected home value is $189,645.9. Hence, Winston is one of the most overpriced housing markets in America.
15. Worcester, Massachusetts
Home Overprice Percentage: 32.90%
Worcester is one of the populous cities based in Massachusetts. As recorded in January, the home overprice percentage for the city is 32.90% which indicates that its housing market is overpriced.
14. Memphis, Tennessee
Home Overprice Percentage: 33.67%
Memphis is a US city situated along the Mississippi River. The average list price in the city is $230,807 while the expected home price is $172,666.
13. Miami, Florida
Home Overprice Percentage: 35.57%
The coastal metropolis of Miami ranks among the 20 most overpriced housing markets in America. As recorded in January, the city’s average list price is $472,970 while the expected home value falls lower.
12. Deltona, Florida
Home Overprice Percentage: 35.65%
Deltona ranks among some of the most overpriced markets in America. As of January 31, the city's housing market is 35.65% overpriced.
11. North Port, Florida
Home Overprice Percentage: 36.14%
North Port is positioned in the Sarasota County in Florida. The city’s housing market is overpriced since the home overprice percentage for it was recorded at 36.14% in January.
10. Charlotte, North Carolina
Home Overprice Percentage: 36.45%
Charlotte is another overpriced housing market in America. As recorded in January, the average list price in the city is $368,712 while the expected home price is $270,209.1.
9. Orlando, Florida
Home Overprice Percentage: 36.76%
One of the most visited cities in the US, Orlando, has an overpriced housing market. As of January 31, the average list price in the metro exceeds the expected home price.
8. Lakeland, Florida
Home Overprice Percentage: 37.21%
As evident from the home overprice percentage of 37.21%, Lakeland ranks as one of the 20 most overpriced housing markets in America.
7. Las Vegas, Nevada
Home Overprice Percentage: 38.05%
Las Vegas is a popular US city and is overpriced for housing. As reported by Beracha and Johnson Housing Market Ranking, the local housing market tends to be 38.05% overpriced.
6. Knoxville, Tennessee
Home Overprice Percentage: 38.43%
Knoxville serves as the principal city of the Knoxville metropolitan area. The city ranks among the most overpriced housing markets in America since the market is 38.43% overpriced, as of January.
