Study Ranks Florida, Ohio Housing Markets Among Nation’s Most Overvalued

By Paul Owers | 01/25/2022

Tags: Executive-Education | Finance | Housing-Ranking | Press-Releases | Real-Estate
Categories: Faculty/Staff | Initiatives | Research

FAU Economist: Beware of Risks in Buying Close to Pricing Peak 

Housing Markets

BOCA RATON, Fla. – When it comes to metropolitan areas with the nation’s most overpriced homes, Florida and Ohio are leading the pack, according to researchers at Florida Atlantic University and Florida International University.

Each month, FAU’s Ken H. Johnson, Ph.D., and FIU’s Eli Beracha, Ph.D., rank the most overvalued housing markets of America’s 100 largest metros, similar to the popular S&P CoreLogic Case-Shiller home price index. Johnson and Beracha incorporate average or expected price changes and provide an estimate of how much a market’s housing stock is over- or undervalued, relative to its historic pricing.

Among the 33 most inflated U.S. markets at the end of December 2021, seven are from Florida, including No. 12 Lakeland and No. 14 Tampa, both at more than 40 percent above historic pricing. Ohio has four metros in the top third of the rankings.

“If you’re buying a home in these metros across Florida, Ohio and other areas, it’s imperative that you know you’re buying close to the peak of the market,” said Johnson, an economist for FAU Executive Education within the College of Business. “The danger is that prices will soon level off or even decline, and you’ll be stuck in that home for a significant amount of time before you can sell it at a profit that makes financial sense.”

The nation’s most overvalued market remains Boise, Idaho, where buyers pay about 77 percent more than they should, based on past pricing trends. Austin, Texas, is second, with buyers paying a premium of about 60 percent.

Utah has three metros in the Top 10: Ogden (3), Provo (5) and Salt Lake City (9). The full rankings with interactive graphs can be viewed here.

A recent rise in mortgage rates will soon affect the U.S. housing market, and metro areas with low housing inventories and expectations of future population growth are positioned to withstand the looming real estate slowdown, the researchers said. 

For instance, Miami, the least overvalued market in Florida at about 21 percent, has relatively low housing inventory levels and a steady influx of new residents, likely helping Florida’s largest metro weather pricing slowdowns. Madison, Wisconsin; Oklahoma City, Oklahoma; and Richmond, Virginia are other areas where prices could level off rather than drop sharply, according to the researchers. 

However, markets with limited prospects for future growth could face more difficult downturns in the face of rising mortgage rates. Those areas include: Detroit; Memphis, Tennessee; and Dayton and Youngstown, Ohio. 

“Mortgage rates have been near historic lows for the last two years and have helped keep housing demand strong through the pandemic,” said Beracha, of FIU’s Hollo School of Real Estate. “Now we’re seeing rates rise, and that’s going to take some buyers out of the market and curtail price gains. Areas like Miami are better equipped than others to withstand the hit.”

New York and San Francisco, two traditionally expensive housing markets, are among the nation’s least overvalued, according to the researchers’ rankings.

“Buyers in some cities have seemingly learned from past mistakes,” Johnson said. “It is as if they have refused to be tricked into believing that housing prices only grow to the sky a second time around.”

The researchers use publicly available data from the online real estate portal Zillow or other providers. The data, which extends from January 1996 through December 2021, covers single-family homes, townhomes, condominiums and co-ops.