Study: U.S. Home Prices Moderate, But Buyers Are Still Paying Premiums

By Joshua Glanzer | 04/04/2023

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


Prices moderating but remain high in certain areas

Atlanta is the nation's most overvalued housing market, although Florida remains at the center of the U.S. real estate correction, new research shows.

At the end of February, Atlanta homebuyers were paying 49.55 percent more than the long-term pricing trend for the area, but five of the 10 most overvalued markets were in the Sunshine State, according to the Real Estate Initiative at Florida Atlantic University.

In No. 2 Cape Coral-Fort Myers, No. 6 Lakeland, No. 7 Palm Bay, No. 8 Deltona and No. 9 Tampa, buyers paid premiums of at least 41 percent in February. No. 11 North Port-Bradenton was more than 39 percent overvalued. The full rankings of pricing premiums can be found here.

The initiative publishes monthly and investigates property prices, rents and the relationship between rents and prices in the largest metro areas in the nation, using publicly available data from online real estate portal Zillow or other providers.

When the first pricing premium rankings were released in 2021, Boise, Idaho, was the most overvalued market at nearly 80 percent. In February, Boise was ranked No. 36, with buyers paying 31.08 percent more than they should, based on property pricing history in Boise.

“Clearly, markets today aren't nearly as overvalued because prices are leveling off, but they still are much higher than what historical trends suggest they should be,” said Ken H. Johnson, Ph.D., an economist in FAU’s College of Business. “In general, consumers should be careful about buying in the current housing climate. While I don't expect prices to plummet like they did back in 2008 and 2009, people who buy late in this housing cycle could end up waiting years before being able to resell for an acceptable profit."

Renters in most parts of the country also are paying more than they should, based on the historical rental trends. Again, Florida dominated the February list of most overvalued rental markets, with the nation's three largest premiums in Cape Coral-Fort Myers (15.51 percent), North Port-Bradenton (12.46 percent) and Miami (12.14 percent). Cape Coral-Fort Myers had the nation’s largest year-over-year rent increase in February at 13.59 percent, but rent hikes have slowed across Florida and most parts of the country.

The initiative also publishes a ranking of price-to-rent ratios for markets across the country. Relatively high price-to-rent ratios tend to favor renting over ownership and threaten local home prices, while relatively low ratios tend to support ownership and support local prices.

The goal of FAU's Real Estate Initiative, a collaboration of FAU, Florida International University, Florida Gulf Coast University and The University of Alabama, is to help consumers make more informed real estate decisions. Researchers combine raw home price and rental data from Zillow to generate monthly reviews of the nation’s top metro markets.