Austin 2nd most overvalued housing market in U.S., study finds

New data in a study from researchers at Florida Atlantic University and Florida International University looked at the top 100 housing markets in the U.S. and found that 15 markets are overvalued by more than 50% while four of them, including Austin, Texas is overvalued by more than 60%.

Topping the list is Boise, Idaho. Researchers looked at the pricing history which suggests that homes now should cost an average of $299,202 there, but the typical buyer is paying $516,548. That's 72.64% above the area's long-term pricing trend. Other reports have found Boise to be overpriced as well.

Austin, Texas is second but quickly gaining ground, the study finds. Buyers are paying 67.70% more than they should.

The two other cities researchers say buyers are paying a premium by more than 60% are Ogden, Utah (64.73%) and Las Vegas (61.48%).

Buyers in other markets in Texas fare much better than those in Austin. People in Dallas pay 48.35% more and 31.30% more in San Antonio. Those in Houston only pay 29.41% more.

Below is a look at the 15 markets overvalued by 50%:

1. Boise, Idaho (72.64%)
2. Austin, Texas (67.70%)
3. Ogden, Utah (64.73%)
4. Las Vegas, Nevada (61.48%)
5. Atlanta, Georgia (58.01%)
6. Phoenix, Arizona (57.94%)
7. Provo, Utah (57.02%)
8. Fort Myers, Florida (56.26%)
9. Spokane, Washington (56.25%)
10. Salt Lake City, Utah (55.75%)
11. Charlotte, North Carolina (55.25%)
12. Lakeland, Florida (53.22%)
13. Tampa, Florida (52.41%)
14. Raleigh, North Carolina (51.70%)
15. Detroit, Michigan (51.16%)

"Near-record-low mortgage rates helped fuel demand for housing, especially during the pandemic, and the competition for homes pushed prices higher. But now the Federal Reserve is raising rates to curtail inflation, and already that’s cooling demand," said Ken H. Johnson, Ph.D., an economist in FAU’s College of Business, in a news release.

RELATED COVERAGE:

• Average US mortgage rates hit 5.78%, highest level since 2008
• Home prices have begun falling in these 10 cities, according to Realtor.com
• 28% of Texas single-family homes purchased by institutional buyers in 2021: report

Johnson says a looming slowdown could help people priced out to get into a home, but it also could be a serious concern for others.

"If we’re not at the peak of the current housing cycle, we’re awfully close," he said. "Recent buyers in many of these cities may have to endure stagnant or falling home values while the market settles – and that’s not what they want to hear if they had planned to resell anytime soon."

Each month, Johnson and Eli Beracha, Ph.D., of FIU’s Hollo School of Real Estate, rank the most overvalued housing markets of America’s 100 largest metros by determining the premiums buyers are paying. The larger the premium, the more overpriced a market is. The researchers’ data dates back to 1996 and covers single-family homes, townhomes, condominiums and co-ops.

The rankings do not consider how expensive a market traditionally is. The two high-cost housing markets of New York and San Francisco, for example, are among the least overvalued in the country because homes in those two metros still are selling relatively close to where they should be, based on historical trends.