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The economic fallout of COVID-19 continues to haunt American house hunters. In 2021, while most of us were still wearing masks in public and looking out for our elderly neighbors, home prices became scorchingly hot. Prices rose faster in 2021 than ever before, and the typical home suddenly gained $50,000 in value.
While prices have cooled slightly in some areas, that’s not true everywhere. And as much as a house hunter might want to purchase a new home, here are 10-plus cities where it simply makes no financial sense.
Overvalued homes
Have you ever wondered what would happen if interest rates dropped, more homeowners put their houses on the market, and the influx of new inventory drove the price of homes downward? The experts have.
Researchers at Florida Atlantic University and Florida International University used publicly accessible Zillow data to determine where the most overvalued homes are located. They compared current prices to pre-pandemic values to get a sense of what would happen if a market correction occurred.
Will prices crash like they did after the last housing cycle peak, or will they flatten out and slowly work their way back to “normal”?
Researchers looked at the 100 most populous metro areas in the U.S. and found that 98 continue to sell property at a premium. If prices stabilize, those who’ve purchased a home in the past few years could watch their investment lose value. Those who took out a new mortgage to make the purchase could also end up owing more than the property is worth.
Here are the 10 cities Florida researchers found to be the most overvalued and by how much prices are inflated:
- Detroit: 40.79%
- Atlanta: 40.37%
- Las Vegas: 37.53%
- Knoxville, Tennessee: 37.33%
- Cape Coral, Florida: 36.11%
- Tampa, Florida: 35.98%
- Charlotte, North Carolina: 35.09%
- Palm Bay, Florida: 34.94%
- Orlando, Florida: 34.29%
- Lakeland, Florida: 34.06%
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A lopsided correction?
If and when a market correction occurs, homeowners in some cities will likely feel the impact more than others. For example, homeowners in areas that regularly enjoy an influx of new residents may experience a smoother price transition. Home prices in those cities may take years to approach their new normal.
In the meantime, without a crystal ball, it’s impossible to know which areas of the country are likely to be hardest hit. Still, based on the CoreLogic Market Indicator (MRI), these five markets are at the highest risk of declining home prices over the next 12 months:
| Metro Area | Level of Risk of Price Decline |
|---|---|
| Prove-Orem, Utah | Above 70% |
| Salt Lake City, Utah | Above 70% |
| Atlanta-Sandy Springs-Rosewell, Georgia | Above 70% |
| Tucson, Arizona | Above 70% |
| Palm Bay-Melbourne-Titusville, Florida | Above 70% |
What you can do
Eli Beracha, Ph.D., director of Florida International University’s Hollo School of Real Estate, told CoreLogic, “Housing prices can and will re-stabilize. The only question is how local home prices will return to a given area’s long-term pricing trend.”
Beracha wonders if prices will fall fast enough to extinguish all worries about affordability or if the return to long-term pricing trends will be so slow that homeowners will retain the newfound equity in their property.
Confusing the subject even more is the fact that every housing market is a world unto itself. While homes in some areas may retain equity, values in others may plummet.
Whether you’re a homeowner or a potential buyer, here are a few tips for making the most of your situation:
| Homeowner | Potential Home Buyer |
|---|---|
| Keep your home in tip-top shape. No matter what happens, a well-maintained home will appraise for more than a poorly maintained home. Your goal is to maintain as much equity as possible. | Keep an eye on your credit score. If it’s lower than you would like, take steps to boost it. The goal is to be ready to apply for a new mortgage. |
| Get involved in your neighborhood watch. Homes in areas with low crime rates generally receive a higher appraisal value and are in higher demand. | Pay attention to pricing trends. If prices drop faster in some areas than others, consider buying a home in the lower-price area. |
| Take an interest in area schools. Even if you don’t have children in school, studies reveal that property values rise by about $20 for every $1 in school funding. | Continue to save. The ideal situation involves having enough for a large down payment and an emergency savings account with enough deposited to cover three to six months’ worth of bills. |
Even if buying in your dream city doesn’t make sense today, home prices and mortgage rates can (and do) change. The U.S. housing market has experienced wild fluctuations in pricing before but managed to recover.
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3 Comments
Please Let me know what you think of the market in San Luis Obispo California. I personally feel it’s suck bigtime here and I can’t keep people from hunting down my unlisted phone number to ask me about selling a coupl properties I own all the time and I’ve never list either of them for sale nor do I want to sell them, but am being pestered all the time about selling them. Black rock Vanguard, and State Street and making a buying run on residential properties in AMERICA we must not let them buy up inventory we must stop them from doing that our Gov’t must stop them they are not commercial investments, they are for AMERICAN CITIZENS ONLY, AND ONLY AMERICAN CITIZENS, ASSIMILATED AMERICAN CITIZENS NOT NEWLY MINTED ILLEGALS !!!
I’m sorry you’re experiencing that. I found the study interesting. I’m not sure what the parameters of their research were. However, the majority of cities were in Florida, & absolute zero in California. I’m originally from WI & we dealt w the “Illinoisers” trying to buy our land, especially up north, for getaways.
I also lived in WA state where the impact on housing costs were felt greatly as Californians sold their way overpriced homes, then paid cash for homes in WA state. That drove the prices sky high. I remember moving to the Olympia-Tumwater-Lacey area in 97. I stopped by 1 of the offices (I will leave them anonymous) you’d check in with when you’re moving to a new area. To wonderful senior women greeted me w their 1st question: “Are you from California?”
“No.”
Then they pulled put a sign (I wish I’d have taken a picture) that essentially something to the effect of “Californians, make a u-turn on I-5 & go back home.” Only their sign was 100% more cleaver than that.
My sons had moved to CO. I’d visit like once a yr to see my grandkids… oh yeah… & my sons & daughter-in-laws too.
When I 1st visited I saw signs for homes $100,000+. The next visit $200k+. Then $3-400k+. By the time I moved to CO in 2015, it was $5-600k+! And that was just your basic castles built for your 2.5 kids, all in HOA socialist controlled neighborhoods where there were more rules on what you weren’t allowed to do w your own home vs what you could do, including if you wanted to put a storage shed in your backyard, it had to essentially be the same siding & roof colors (materials too I think) as your home. Personally I believe HOA’s should be outlawed, or at least voluntary. Especially since they essentially run by lawyers who have that caveat about being able to place a lien on your home. ???????????? Completely socialist communist.
Anyways California used to be a respectable state. Then the socialist communist fascist leftist progressive atheist democrats (SCFLPAD’s for short) took over. It was a couple of female socialist/communist (is there really any difference?) instructors who moved to WA state & got into the school boards (parents, you really need to be more involved) & changed the face of public brainwashing I mean re-education camps I mean education system in WA state, which also became a pattern elsewhere.
But alas I digress.
I don’t mind people moving where they want. But the problem w many Californians who moved (until recently) to get away from their big city problems, is that they brought their big city problematic mindset w them & instead of learning from their mistakes of voting the wrong people into office, they continued to vote for the same kinda folks who caused their big city problems to begin with. Only now, they’re infecting another state, region. Finally, hardworking, law-abiding, taxpaying American citizens who are mostly conservative had enough of big blue & started vacating California to head to red states. They had enough of Gov Gruesome’s theft & mismanagement (including the sad fures which could’ve been mostly preventable w just common sense forest ground mgmt… but hey, that doesn’t promote the SCFLPAD’s DEI initiative & false narratives, which sadly cost many their homes & livelihoods, & some their lives. ????
Anyways sorry for rambling on here.
I agree Black Rock, others, communist mainland China & other countries should be prohibited from buying any United States soil, minerals, businesses, etc.
I hope you’re able to get your problems resolved.
Have you tried the Do Not Call list? What I do is I ask them how much and then tell them twice that amount, they don’t bother me after that.
Lastly, you are 100% right. Our housing should be for American citizens ONLY! No ‘illegal aliens’ should be allowed to buy any real estate, regardless, of what kind in America. No other country allows that and we need to put a stop to it too. This government needs to take back all of the farm land that China has bought & not allow them to buy anything related to real estate/businesses or commercial real estate again, including shopping centers.
The Governor in Arkansas found out that China was trying to close a deal with one of their large seed companies, and she put a stop to it! They get a hold of owning our seed companies, they control our food supply!!