Insider Monkey

20 Most Underpriced Housing Markets in the U.S.

Ramish Cheema
8 min read

In this piece, we will take a look at the 20 most underpriced housing markets in the U.S. For more markets, head on over to 5 Most Underpriced Housing Markets in the U.S.

Apart from the stock market, the housing market is one of the most crucially watched sectors of the American economy. Housing prices, not only in America but all over the world, are a key barometer of economic health. This is due to the fact that higher prices indicate that the public is relatively prosperous as it can afford to funnel out more funds for large purchases. Additionally, this rising demand also puts pressure on construction companies to build more houses. Since a variety of industries, such as cement, lumber, wiring, appliances, and more are connected to the housing industry, higher spending by the construction companies also ends up stimulating these sectors as well.

At the same time, recent developments in the U.S. and the global economy have also put the housing market under strain. Starting with the coronavirus pandemic, even though the pandemic induced a widespread economic slowdown, the housing market presented an interesting case study. Researchers from the University of Chicago show that lockdowns appear to have a direct impact on housing prices. They show that in the aftermath of the pandemic, housing prices grew the fastest in regions where people spent more time indoors. The researchers also break down the growth in housing prices and segment it based on the reasons for the growth. This reveals that half of the growth in housing prices in 2020 was due to lockdowns and stay at home mandates, with lower mortgages due to historically low interest rates fueling a smaller portion.

This phenomenon of the pandemic and lockdowns affecting home prices appears to be universal. This is due to the fact that the market in Norway collapsed almost immediately as the pandemic started to take its effects, and the drop took place before the lockdowns. The prices then recovered after the lockdowns were over.

Delving deeper into the American market, data from the Federal Reserve Bank of Dallas shows that the housing market was relatively resilient to the coronavirus shock than it was in the aftermath of the Great Recession of 2008 since home buyers were not sitting on loans waiting to go bad. It adds that stimulus spending by the U.S. government enabled households to stay afloat even as unemployment rose, and low mortgage rates enabled a large number of people to keep their homes. However, the aftermath of the pandemic would have far reaching and more devastating effects on the market, as prices jumped by as much as 19% as of December 2021. A big reason behind this growth was the fact that people assumed that prices would jump in the future as the economy recovered and ended up diving into home purchases - essentially creating a self fulfilling prophecy.

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