Home prices are inching up near peak levels once again, and an increasing number of markets are being dubbed “overvalued” by economists.
Read more: Home Sales Surge to 18-Month High
Tight for-sale inventories mixed with strong buyer demand is pushing up the median price of homes. In fact, the median price of a home sold in April was $219,400, up nearly 9 percent compared year ago levels, according to the National Association of REALTORS®. That remains below the 2006 peak of $230,400, but NAR Chief Economist Lawrence Yun says he expects to approach that level this year.
Income growth continues to lag home price growth and a handful of housing markets are pushing past what is considered sustainable based on median incomes. A new analysis from CoreLogic calls out seven of the top 100 metro markets as being overvalued — Austin, Texas; Houston; Dallas; San Antonio, Texas; Charleston, S.C.; Miami; and Washington, D.C.
“If there were more construction, these markets would not be overvalued,” says Sam Khater, deputy chief economist at CoreLogic.
Four of the seven markets on CoreLogic’s list are in Texas. Notably, these markets did not surge – nor crash — during the last housing bubble. Prices have hit record highs in markets like Dallas, where home values are 15 percent above their peak in 2007, and in Austin home prices are 39 percent above what CoreLogic considers sustainable. However, economists note the Texas economy is diverse, with technology, health care, insurance, and oil and gas jobs fueling the increases in buyer demand.
Home prices in Charleston, Miami, and Washington, D.C., remain below their 2007 peaks but have seen increases, mostly driven by job growth as well.
While the seven cities are considered overvalued, they are also considered “healthy,” Khater says.
“They can be overvalued, but be active and healthy and not so out of whack that it implies a bust,” he says. Prices are being driven largely by low inventories and high buyer demand, not by the easy credit that happened during the last housing boom that ultimately led to the market’s downfall.
Source: “7 Major Housing Markets Now ‘Overvalued,'” CNBC (May 22, 2015)