Home prices appear to have peaked in a growing number of US markets, according to a July analysis by researchers at Florida Atlantic University and Florida International University.
Ken H. Johnson of the FAU, and Ph.D. Eli Beracha of the Financial Intelligence Unit, ranked the 100 most valuable housing markets by analyzing their premiums — the percentage above the long-term pricing trend that consumers must pay in order to purchase property. The higher the premium, the higher the market price.
In July, premiums were lower than June in 27 markets, mostly west of the Mississippi, and 22 of 27 markets also saw price drops. Here are among the metros with lower premiums and average fares: Austin, Texas; Denver. Minneapolis. Los Angeles; Phoenix. Salt Lake City, Utah; San Francisco; and Seattle.
In June, premiums fell in 12 markets and average prices fell in seven.
A lower premium is a classic sign of rising home prices, according to Johnson, an economist at FAU School of Business.
“The continued increase in the number of insurance premium deflations in our monthly reports strongly suggests that individual housing markets have reached, or will soon experience, their price peaks,” he said. “We are at a turning point. The probability of significant price increases in the near future is decreasing day by day.”
But Peracha said the data also shows that prices are still high in most markets. Home values are not expected to fall sharply across the board, as they did during the last downturn in the housing sector in 2006-2011.
“There simply isn’t enough stock to go around,” said Beracha, of the Hulu School of Real Estate in the Financial Intelligence Unit. “This shortfall in supply will continue to pressure prices in many areas.”
The latest numbers reveal that Boise, Idaho, remains the most overvalued market in the country, with buyers pushing 66.73 percent above the long-term pricing trend. Austin, once the second most overrated market, has been surpassed by Las Vegas and Fort Myers. The Sunshine State also has two other metro lots, Lakeland and Tampa, in the top ten.
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Researchers study long-term pricing trends for markets going back to 1996, and the data covers single-family homes, townhomes, condominiums, and co-ops.
Johnson and Peracha believe the severity of the US housing slowdown will vary across the country.
Markets with persistent inventory shortages and growing populations are likely not to experience significant price drops. But that means affordability will continue in those areas, including metros in Florida, Georgia and North Carolina.
Markets with stagnant or declining populations and more homes for sale, such as metros in California, Oregon, and Washington, may see significant price drops. But this would also make properties there more affordable for buyers currently priced out of the market.
“Will prices fall quickly and significantly or will we see inventory issues in the country support prices at the expense of a prolonged period of housing unaffordability?” Johnson said. “It will all depend on population movements and how quickly the much-needed housing units are built.”