According to Moody’s Analytics, home values are too high in 97% of US cities. What’s more, the report shows Boise, Idaho is the most overpriced city in the US.
Due to the pandemic, Boise became the main destination for technology workers seeking to relocate from costly California cities. The median house price in Boise is now 73% above its actual value.
The second most overpriced city is Sherman-Denison, Texas. Here you’ll find that homes are valued 60% higher than they should be. And Muskegon, Michigan, takes third place with 59% of homes being overpriced.
A real estate market is labeled “overvalued” if property prices in the region are above the historical link between construction expenses, home prices, rents, and incomes.
This might explain why smaller cities, such as Boise, Sherman-Denison, and Muskegon, which are listed among the most overvalued housing markets in the country, outperform notoriously pricey locations such as New York.
While housing is more expensive in cities like New York or San Francisco, employees there typically make more money and can afford to pay higher rates.
That said, homebuyers may find these findings alarming, especially if they live in areas where real estate values have increased rapidly due to the pandemic.
In addition to that, home buyers confront a double-whammy of rising mortgage rates and escalating housing prices, which can cost thousands of dollars more each year.
However, some cities (particularly those in the South and West) that have seen a rise in buyers during the pandemic could see a 10% decrease in home values over the next several years.