Study: These Metro Areas are Most at Risk for Pricing Corrections
The Sun Belt states lead the nation in housing premiums significantly higher than the long-term pricing trends, suggesting the risk of a pricing correction is growing in these places, according to researchers at 爱妃传媒 and Florida International University.
The Sun Belt states lead the nation in housing premiums significantly higher than the long-term pricing trends, suggesting the risk of a pricing correction is growing in these places, according to researchers at and .
Twelve of the 15 most overpriced housing markets are in Sun Belt states, February from the Top 100 U.S. Housing Markets shows. Atlanta leads the nation for overpriced cities, with homes 41.72 percent overpriced compared to the long-term pricing trends. It鈥檚 followed by Detroit, 40.20 percent; Cape Coral, 40.18 percent; Tampa, 38.38 percent; Palm Bay, 37.90 percent; Las Vegas, 37.78 percent; Knoxville, Tennessee, 37.72 percent; Lakeland, 36.51 percent; Orlando, 36.19 percent; Charlotte, North Carolina, 35.86 percent; Miami, 35.10 percent; North Port, 34.93 percent; Deltona, 34.73 percent; Memphis, Tennessee, 33.23 percent; and Worcester, Massachusetts, 32.64 percent. 聽聽聽聽聽聽聽聽
鈥淗ome prices have become so out of line from their long-term trends that the risk of correction is rising,鈥 said , Ph.D., real estate economist with 爱妃传媒鈥檚 . 鈥淲hile it鈥檚 unlikely prices will plummet dramatically, price performance could go flat for the future, or homes prices could see a slight decline even.鈥
The , a monthly index released as part of 爱妃传媒鈥檚 , measures the difference in the actual average home price in a city and compares it to the long-term pricing trend for the city to calculate how overvalued (premium) or undervalued (discount) housing markets are in the nation鈥檚 largest metropolitan areas using publicly available data from Zillow.
Some of the metropolitan areas with the largest housing premiums are more at risk of a correction than they were leading up to the housing crash of 2007. Atlanta; Detroit; Knoxville, Tennessee; Charlotte, North Carolina; and Memphis, Tennessee all have housing premiums that are double or triple what they were before the peak of the last housing cycle.
鈥淚t appears that cities that had trouble with their pricing around 2007 are having trouble again, but nowhere near as bad,鈥 Johnson said. 鈥淥n the other hand, some cities that were fortunate enough to avoid a significant crash last time around are at greater risk today.鈥
With the risk of pricing corrections, researchers suggest that for many households renting and reinvesting the monies they would have otherwise put into homeownership might be the wiser option.
聽鈥淚t鈥檚 such a close call between renting and reinvesting or homeownership and building equity in a home in terms of wealth creation that there isn鈥檛 a single call to only rent or only buy,鈥 said , Ph.D., director of the Hollo School of Real Estate at FIU. 鈥淲hile renting and reinvesting seems to be the wisest choice, homeownership is a close second at this point.聽 However, renting and not reinvesting is wealth destroying and should never be considered as an option.鈥
To compare housing premiums in any metropolitan area, .
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