Phoenix Metro Homes Among Nation’s Most Overvalued, Study Finds
Investor · Scottsdale Austin Tuktoyaktuk · Member since 2021 · 4k+ posts · 4k+ votes
Phoenix Metro Homes Among Nation’s Most Overvalued, Study Finds
Most Popular Reply
Real Estate Agent · Nashville, TN · Member since 2015 · 2k+ posts · 2k+ votes
4yWhat is overpriced and overvalued?
Overvalued by 60%? By what metric? What determines overvalued? Are properties listed at 60% more than buyers are willing to pay?
If someone in the free and open market is willing to pay $X how is that overpriced? If a house is priced $X and no one is willing to pay that price, then it's overpriced.
If someone is freely willing to pay $X then, by definition, it's not overpriced.
20 Replies
- Investor · Scottsdale Austin Tuktoyaktuk · Member since 2021 · 4k+ posts · 4k+ votes4y
Quote from @Account Closed:
The Phoenix housing market has become overpriced.
That’s according to a recent study from researchers at Florida Atlantic University and Florida International University.
The research found that homes in various metro areas are substantially overvalued with a low supply of houses on the market. It found that four U.S. housing markets are overvalued by more than 60%. Meanwhile, homes in another 11 markets are overvalued by 50% or more.
The research says that the Phoenix metro area ranks sixth nationally in terms of overvalued housing markets at 57.94%.
It says that at the end of April, the average home price in Phoenix was $466,170. This was much higher than the expected home price, which was under $300,000 ($295,164.60).
Home prices have increased rapidly in the Phoenix metro area. The average home price as of April 30, 2021, was $356,078. That means the average home price increased by more than $110,000 in a one-year span; it was a 30.9% increase in home values. Meanwhile, the expected home price only increased by about $10,000 in that stretch.
The economists who conducted the study don’t think this trend will continue.
Using open-source data from Zillow or other providers, researchers Ken H. Johnson, Ph.D., and Eli Beracha, Ph.D., have developed a methodology to score the top 100 most overpriced or underpriced metropolitan cities in the U.S. The data allows readers to quickly see the premium or discount that they are paying in their metro, on average, and further allows them to make more informed decisions about their real estate investments.
TOP 100 U.S. HOUSING MARKETS How Much the City is Over Priced 1 Boise City, ID 72.64% 2 Austin, TX 67.70% 3 Ogden, UT 64.73% 4 Las Vegas, NV 61.48% 5 Atlanta, GA 58.01% 6 Phoenix, AZ 57.94% 7 Provo, UT 57.02% 8 Fort Myers, FL 56.26% 9 Spokane, WA 56.25% 10 Salt Lake City, UT 55.75% 11 Charlotte, NC 55.25% 12 Lakeland, FL 53.22% 13 Tampa, FL 52.41% 14 Raleigh, NC 51.70% 15 Detroit, Ml 51.16% 16 Nashville, TN 49.13% 17 North Port-Sarasota-Bradenton, FL 48.92% 18 Dallas-Fort Worth, TX 48.35% 19 Melbourne, FL 47.71% 20 Memphis, TN 47.34% 21 Daytona Beach, FL 46.27% 22 Stockton, CA 46.07% 23 Colorado Springs, CO 45.89% 24 Grand Rapids, Ml 43.35% 25 Orlando, FL 43.04% 26 Youngstown, OH 42.79% 27 Tucson, AZ 42.24% 28 Jacksonville, FL 41.85% 29 Knoxville, TN 41.77% 30 Indianapolis, IN 41.06% 31 Greensboro, NC 40.75% 32 Dayton, OH 40.49% 33 Winston Salem, NC 39.28% 34 Seattle, WA 39.27% 35 Chattanooga, TN 39.16% 36 Columbus, OH 39.12% 37 Denver, CO 38.46% 38 Cleveland, OH 37.46% 39 Greenville, SC 37.33% 40 Cincinnati, OH 35.36% 41 Albuquerque, NM 34.32% 42 Riverside, CA 31.88% 43 Akron, OH 31.66% 44 Kansas City, MO 31.40% 45 San Antonio, TX 31.30% 46 Buffalo, NY 31.28% 47 Columbia, SC 30.92% 48 Toledo, OH 29.84% 49 Miami-Fort - Lauderdale, FL 29.84% 50 Birmingham, AL 29.78% 51 Sacramento, CA 29.56% 52 Houston, TX 29.41% 53 Charleston, SC 28.56% 54 Fresno, CA 28.25% 55 Omaha NE 27.41% 56 Bakersfield, CA 27.20% 57 Augusta, GA 26.87% 58 San Diego, CA 26.56% 59 Scranton, PA 26.30% 60 Portland, OR 26.26% 61 Jackson, MS 26.15% 62 Louisville Jefferson County, KY 25.55% 63 Rochester NY 25.42% 64 Tulsa, OK 24.65% 65 Milwaukee, Wl 24.34% 66 New Haven, CT 23.89% 67 Wichita, KS 23.31% 68 El Paso, TX 22.73% 69 Worcester, MA 22.72% 70 St Louis, MO 21.39% 71 Madison, Wl 21.12% 72 Pittsburgh, PA 20.35% 73 McAllen, TX 20.08% 74 San Jose, CA 19.81% 75 Chicago, IL 18.97% 76 Minneapolis-St Paul, MN 18.81% 77 Des Moines, IA 18.38% 78 Syracuse, NY 17.99% 79 Allentown, PA 17.79% 80 Oklahoma City, OK 17.59% 81 Providence, RI 17.42% 82 Ventura, CA 16.93% 83 Harrisburg, PA 15.40% 84 Boston, MA 13.82% 85 San Francisco, CA 13.72% 86 Springfield, MA 13.69% 87 Richmond, VA 12.82% 88 Little Rock, AR 12.73% 89 Los Angeles-Long Beach-Anaheim, CA 12.02% 90 Philadelnhia. PA 10.88% 91 Hartford, CT 10.56% 92 Stamford, CT 9.51% 93 Baton Rouge, LA 9.40% 94 Albany, NY 9.36% 95 New Orleans, LA 8.97% 96 Virginia Beach, VA 4.04% 97 Washington, DC 3.84% 98 New York, NY 3.62% 99 Urban Honolulu, HI 2.87% 100 Baltimore, MD 2.63% - Investor & Agent · Tulsa, OK · Member since 2016 · 1k+ posts · 1k+ votes4y
Quote from @Account Closed:
Quote from @Account Closed:
The Phoenix housing market has become overpriced.
That’s according to a recent study from researchers at Florida Atlantic University and Florida International University.
The research found that homes in various metro areas are substantially overvalued with a low supply of houses on the market. It found that four U.S. housing markets are overvalued by more than 60%. Meanwhile, homes in another 11 markets are overvalued by 50% or more.
The research says that the Phoenix metro area ranks sixth nationally in terms of overvalued housing markets at 57.94%.
It says that at the end of April, the average home price in Phoenix was $466,170. This was much higher than the expected home price, which was under $300,000 ($295,164.60).
Home prices have increased rapidly in the Phoenix metro area. The average home price as of April 30, 2021, was $356,078. That means the average home price increased by more than $110,000 in a one-year span; it was a 30.9% increase in home values. Meanwhile, the expected home price only increased by about $10,000 in that stretch.
The economists who conducted the study don’t think this trend will continue.
Using open-source data from Zillow or other providers, researchers Ken H. Johnson, Ph.D., and Eli Beracha, Ph.D., have developed a methodology to score the top 100 most overpriced or underpriced metropolitan cities in the U.S. The data allows readers to quickly see the premium or discount that they are paying in their metro, on average, and further allows them to make more informed decisions about their real estate investments.
TOP 100 U.S. HOUSING MARKETS How Much the City is Over Priced 1 Boise City, ID 72.64% 2 Austin, TX 67.70% 3 Ogden, UT 64.73% 4 Las Vegas, NV 61.48% 5 Atlanta, GA 58.01% 6 Phoenix, AZ 57.94% 7 Provo, UT 57.02% 8 Fort Myers, FL 56.26% 9 Spokane, WA 56.25% 10 Salt Lake City, UT 55.75% 11 Charlotte, NC 55.25% 12 Lakeland, FL 53.22% 13 Tampa, FL 52.41% 14 Raleigh, NC 51.70% 15 Detroit, Ml 51.16% 16 Nashville, TN 49.13% 17 North Port-Sarasota-Bradenton, FL 48.92% 18 Dallas-Fort Worth, TX 48.35% 19 Melbourne, FL 47.71% 20 Memphis, TN 47.34% 21 Daytona Beach, FL 46.27% 22 Stockton, CA 46.07% 23 Colorado Springs, CO 45.89% 24 Grand Rapids, Ml 43.35% 25 Orlando, FL 43.04% 26 Youngstown, OH 42.79% 27 Tucson, AZ 42.24% 28 Jacksonville, FL 41.85% 29 Knoxville, TN 41.77% 30 Indianapolis, IN 41.06% 31 Greensboro, NC 40.75% 32 Dayton, OH 40.49% 33 Winston Salem, NC 39.28% 34 Seattle, WA 39.27% 35 Chattanooga, TN 39.16% 36 Columbus, OH 39.12% 37 Denver, CO 38.46% 38 Cleveland, OH 37.46% 39 Greenville, SC 37.33% 40 Cincinnati, OH 35.36% 41 Albuquerque, NM 34.32% 42 Riverside, CA 31.88% 43 Akron, OH 31.66% 44 Kansas City, MO 31.40% 45 San Antonio, TX 31.30% 46 Buffalo, NY 31.28% 47 Columbia, SC 30.92% 48 Toledo, OH 29.84% 49 Miami-Fort - Lauderdale, FL 29.84% 50 Birmingham, AL 29.78% 51 Sacramento, CA 29.56% 52 Houston, TX 29.41% 53 Charleston, SC 28.56% 54 Fresno, CA 28.25% 55 Omaha NE 27.41% 56 Bakersfield, CA 27.20% 57 Augusta, GA 26.87% 58 San Diego, CA 26.56% 59 Scranton, PA 26.30% 60 Portland, OR 26.26% 61 Jackson, MS 26.15% 62 Louisville Jefferson County, KY 25.55% 63 Rochester NY 25.42% 64 Tulsa, OK 24.65% 65 Milwaukee, Wl 24.34% 66 New Haven, CT 23.89% 67 Wichita, KS 23.31% 68 El Paso, TX 22.73% 69 Worcester, MA 22.72% 70 St Louis, MO 21.39% 71 Madison, Wl 21.12% 72 Pittsburgh, PA 20.35% 73 McAllen, TX 20.08% 74 San Jose, CA 19.81% 75 Chicago, IL 18.97% 76 Minneapolis-St Paul, MN 18.81% 77 Des Moines, IA 18.38% 78 Syracuse, NY 17.99% 79 Allentown, PA 17.79% 80 Oklahoma City, OK 17.59% 81 Providence, RI 17.42% 82 Ventura, CA 16.93% 83 Harrisburg, PA 15.40% 84 Boston, MA 13.82% 85 San Francisco, CA 13.72% 86 Springfield, MA 13.69% 87 Richmond, VA 12.82% 88 Little Rock, AR 12.73% 89 Los Angeles-Long Beach-Anaheim, CA 12.02% 90 Philadelnhia. PA 10.88% 91 Hartford, CT 10.56% 92 Stamford, CT 9.51% 93 Baton Rouge, LA 9.40% 94 Albany, NY 9.36% 95 New Orleans, LA 8.97% 96 Virginia Beach, VA 4.04% 97 Washington, DC 3.84% 98 New York, NY 3.62% 99 Urban Honolulu, HI 2.87% 100 Baltimore, MD 2.63%
makes sense to see our market (tulsa) in the bottom 1/2… I can’t honestly see how we are overpriced given we are below national averages and not propped up artificially with egregious appraisals & high debt; but so richly cash backed / equity backed. I’m currently helping someone buy something at $271,000 and they will be able to essentially put 50% down. I just don’t see how in the world we are over priced, just because values are going up. - Real Estate Agent · Nashville, TN · Member since 2015 · 2k+ posts · 2k+ votes4y
What is overpriced and overvalued?
Overvalued by 60%? By what metric? What determines overvalued? Are properties listed at 60% more than buyers are willing to pay?
If someone in the free and open market is willing to pay $X how is that overpriced? If a house is priced $X and no one is willing to pay that price, then it's overpriced.
If someone is freely willing to pay $X then, by definition, it's not overpriced.
- Real Estate Agent · Fresno, CA · Member since 2014 · 367 posts · 174 votes4y
That's a great link, I was linking for the section of the top 100 underpriced metro markets but couldn't find it, anybody see it?
- Real Estate Agent · Worcester, MA · Member since 2018 · 515 posts · 408 votes4y
Ironically I sold my investment property in Tempe, AZ last year and invested in Worcester, MA which is where I work as an agent. Worcester made the list here as well and I agree with their assessment. Prices have started to come down and there are less investors searching. But as Mark Twain said. "There are lies, damned lies and statistics".
You need to be a value investor and a House Picker. Not just hoping that all properties will go up in price.
Here is my BP blog where I go into this further, and access to other items in my blog about Worcester Multifamily housing.
- Investor · Las Vegas, NV · Member since 2013 · 8k+ posts · 10k+ votes4y
So they predicting a 40% price drop in those top 5 markets back to “market value”? I assume they are willing to bet at least $100k of their personal money on a 30% price drop then.
I don’t know why people think they can determine market value of anything from a keyboard. As a wise man once said “Farming is easy from 1,000 miles away when your plow is a pencil…”
Do you think one person who worked on this is willing to return their salary if they’re wrong? Where were they last year when these markets were only 40% overpriced? Before they went up another 20%. Maybe they’re just predicting 30 or 40% inflation to “correct” these problems they see.
I assume they used some bs like historical prices compared to historical incomes. Which of course doesn’t take in to account retirees, snowbirds, people fleeing high tax states, people selling in very expensive markets to move to those “cheap” markets. Heck, I wonder if these geniuses even included related costs of housing like utilities, insurance, weather, property age, state income taxes,and property taxes. I’m willing to bet they didn’t. I can afford to pay mroe for my property when I keep more of my income from state income taxes, and I pay lower property taxes and insurance.
- Investor · Scottsdale Austin Tuktoyaktuk · Member since 2021 · 4k+ posts · 4k+ votes4y
Quote from @Luka Milicevic:
What is overpriced and overvalued?
Overvalued by 60%? By what metric? What determines overvalued? Are properties listed at 60% more than buyers are willing to pay?
If someone in the free and open market is willing to pay $X how is that overpriced? If a house is priced $X and no one is willing to pay that price, then it's overpriced.
If someone is freely willing to pay $X then, by definition, it's not overpriced.
I believe their criteria is housing cost as a factor of income.
Simply put, how much of the average income for the area does the average person need in order to qualify for an average house.
Basically, it points out several things:
1. The aveage income in those markets doesn't provide enough to qualify to purchase the average house. (Only the higher incomes can purchase in those markets)
2. That cuts out a lot of people, but not all people. Some people can and will pay the much higher price.
3. Since inventories are still low, lack of inventory isn't reflected in the prices because there are fewer people competing for those properties, (caused by higher interest rates) so the pressure to reduce prices hasn't hit yet.
4. The more interest rates rise, the more out of reach buying homes at the current prices becomes. By the way, 8% was a normal interest rate for buying a house for years & years. I think currently rates are around 5%.
5. It provides a guideline for someone with a reasonable but not great income, on which markets they can move to if they really want to own a home.
6. The offset that isn't readily clear is that people selling in high cost areas can move and buy in a medium cost area and someone living in a medium cost area can sell and move and buy in a low cost area. For instance, many Californians can sell a modest house in California and still afford a nice house in other parts of the country.
7. If the information is used in conjunction with other data, you can determine which markets will cash flow for your investment properties. However, it is offset by crime, distance, and other factors so don't invest just on perceived cash flow or perceived appreciation.
After all, how big can a balloon get before it pops?
- Broker · Logan, UT · Member since 2013 · 1k+ posts · 1k+ votes4y
Quote from @Bill B.:
Heck, I wonder if these geniuses even included related costs of housing like utilities, insurance, weather, property age, state income taxes,and property taxes. I’m willing to bet they didn’t. I can afford to pay mroe for my property when I keep more of my income from state income taxes, and I pay lower property taxes and insurance.
Right? Here is the link to their methodology. They simply are computing a trend line for each market ("using open-source data from third-party housing data providers") and then calculating the deviation from the trend. Apparently if a market appreciates faster than it's long-term historical appreciation, then it's overpriced according to these folks. They don't get into any of the other factors that you mention.
So this list basically underscores a national trend of strong growth in the mountain states and people moving to warmer climates. Add to that a few rust belt cities where real estate was almost free 10-12 years ago. No fancy math needed.
- Investor · Las Vegas, NV · Member since 2013 · 8k+ posts · 10k+ votes4y
So you’re saying if we reduce the trend line to only the last 3 years, then many of the overpriced markets will be underpriced because they are appreciating slower today than the last 3 years? Problem solved.
It’s almost like adding government restrictions and burdens to building while at the same time reducing the amount of available land for building increased the costs to build and therefor the price of a home?
Or, maybe you’re saying inflation being 400% higher than it was while the trend line was being set had something to do with it?
- Investor · Las Vegas, NV · Member since 2019 · 499 posts · 259 votes4y
I think a more appropriate title would be most Unaffordable market than overvalued.
- Investor · Scottsdale Austin Tuktoyaktuk · Member since 2021 · 4k+ posts · 4k+ votes4yIt's all in how you look at things. ;-)
Quote from @Jonathan Oh:
I think a more appropriate title would be most Unaffordable market than overvalued.
Unaffordable means I can't afford it. Over valued means, "I might be able to afford it, but I'm not sure I want to spend that much". - Irvine, CA · Member since 2016 · 545 posts · 613 votes4y
@Luka Milicevic I see overpriced properties being bought all of the time.
Real world scenario 35 minutes apart in CA
Property 1 - $590K
Neighborhood - class D
Schools rated 3/10 and 4/10
Neighborhood amenities- crime, gangs, shootings, on the street prostitution, etc
Property 2 - $595K
Neighborhood - class A
Schools rated 8/10 and 9/10
Neighborhood amenities - top tier parks, neighborhood Aquatic center, Tennis club, etc
With only 35 minutes separating the two, would you consider Property 1 to be overpriced?
Most agents I've talked to talk about neighborhoods in addition to the individual property.
In my opinion, one of these properties is worth $590K, the other is really worth $400K or less, you just have irresponsible individual buyers, and investors overpaying for the property.
Las Vegas, and Phoenix are filled with neighborhoods like the Property 1 scenario
These two cities historically have had deep real estate crashes, and rapid real estate price increases because they have historically been overpriced.
In my opinion this is what the author of the article is trying to articulate
- Lender · Member since 2022 · 50 posts · 33 votes4y
I mean I could have told you that. Go into county records and look at how many homes are owned by Zillow and other similar companies.. There is huge market manipulation being done down there.
- Investor · Las Vegas, NV · Member since 2013 · 8k+ posts · 10k+ votes4y
Yeah, there much fewer and smaller clusters of class d properties in Las Vegas and prices have only dropped more than 4% once ever. California is a whole different animal. They can have an area of class d as big as Las Vegas, and they have a history of price crashes. But you can’t say the $590k property is only worth $400k if it sells for $590k or even $550k. Investors can compare those 2 properties, but people are choosing both properties for a reason. have your realtor tell you why people are buying the Class D property. If they don’t know, find another realtor. There is a reason.
Obviously you bought the $595k property assuming it rents for more, doesn’t have a high Hoa and you believe in the neighborhood. From what I hear that’s cheap for California. Hopefully their hatred of landlords won’t bite you in the end. Personally I don’t know why anyone would put up with it. You’re bordered by states that don’t hate you.
“I’d live in San Diego tomorrow, if it wasn’t part of California.” And “The only good things about California, the weather, the ocean, the views, were there before Californians. The only bad things were created by Californians.”
- Investor · Willow Spring, NC · Member since 2009 · 5k+ posts · 3k+ votes4y
The authors cite their methodology here: https://business.fau.edu/executive-education/housing-market-ranking/methodology/index.php
I am a fan of long-term data. Historically, housing valuations mostly mirror the overall CPI and inflation rate +/- a little, and when things get out of line, there tends to be a correction. Below I annotate the St. Louis Fed (a very good source of long-term data) chart to show the 'disconnect' between housing (blue line) and CPI. Source: FRED Chart. To me it's simple: Buyer Beware, especially if you think there may be an economic slowdown in the near future. I anticipate the blue line at or around -10 "soon" just based on historical trends if interest rates rise per forecast. I make the assumption, too, that we will see a recession late this year, possibly it is already here since 2022Q1 dropped by 1.5% per BEA release on 5/26/2022.
- Investor · Greenville, SC · Member since 2016 · 5k+ posts · 13k+ votes4y
@Chris Martin I'm interested in what actions you are taking with your investment portfolio based on your thoughts of a pending recession and housing correction.
- Las Vegas, NV · Member since 2019 · 173 posts · 78 votes4y
Over priced or over valued... my question would be based on what? As others have said, if people are willing to pay for something that isn't a necessity (which I wouldn't consider owning a home to be, it's something I feel anyone that wants should be able to have, but there are options for those that don't) then it's worth what people are willing to pay.
As someone that lived in NYC and even with a good job was never going to be able to afford a house unless it was inherited or we came into a large sum of money it's hard to understand how NYC is so far down that list. We moved to Las Vegas in 2021 and own a home that literally 90+ years newer, upgrades like solar, and a cost less than half of where we were in NYC. That sounds like a better value to me.
- Investor · Willow Spring, NC · Member since 2009 · 5k+ posts · 3k+ votes4y
Quote from @Mike Dymski:
@Chris Martin I'm interested in what actions you are taking with your investment portfolio based on your thoughts of a pending recession and housing correction.
Selective thinning.
- Boise, ID · Member since 2014 · 121 posts · 73 votes4y
I refuse to use data from Zillow because even though they have some of the most data in the nation about housing, they still managed to lose over $400 million when they exited the iBuying market!
I also find it ironic than in San Jose, their average price is nearly $1.5 million but they are only 19.81% overpriced.
I own a real estate brokerage in Boise, Idaho which they claim to be the #1 overpriced market in the country. However, I have a lot of clients flocking here from more expensive areas and buying homes on acreage for so much less than in California, Seattle, etc., who then work remotely getting paid the salaries from those metro areas while enjoying their own private Idaho.
Join the conversationCreate a free account to reply, vote on answers and follow this thread.