Most Overvalued Markets According to Fitch Ratings

9 Replies

Hi All,

I just came across this list of the five most over-valued housing markets in the US according to Fitch Ratings, which are Las Vegas, San Antonio, Austin, Portland OR, and Dallas. If you live or invest in these cities, what do you think?

List of top 5:

Nationwide heat map of under/overvalued cities - click into the state to see individual cities:

I'm surprised by San Antonio because I thought their growth was more in line with population expansion - I thought it was a good place for appreciation on buy & hold, but now I'm wondering if that's true.

Any over valued housing article that doesn’t even talk about San Francisco, is obviously a joke. 

Housing 15% below where it was 10 years ago is top 5 most over valued in the US? Probably 1 out of 5 markets in the country that are below 2008 pricing?

Well, it took about 3 seconds to google Las Vegas unemployment rate. 5.4% in January 2018. 4.4% in May of 2018 when the article was written. So, since it starts with “rising unemployment” I assume the author doesn’t own a computer or can’t afford internet access. I’m not going to assume they are just outright lying to get people to read their article. Maybe they got sick of waiting for the next crash and thought they’d tried to create one?

Ps. Today's LVRJ has an article about invitation homes ones one of the largest SFR homes landlords. They sold 1100 homes in the last 12 months. 7 were in Las Vegas. They say they are just culling their inventory and letting the good markets run.

Maybe the author doesn’t have a phone either and they couldn’t call any Very large landlords here to get their opinion and instead faxed a request for an opinion from someone that owns no homes in Vegas but once visited a strip club here?

Disclaimer: I didn't click on the article and read it lol.

@Heather H. I'm going to call BS on that article. San Antonio is amazingly priced compared to every market and it is flaming hot because of the affordability. Are the prices going up? Yes of course just like everywhere else is. However you have to be smoking crack along with a million other things to not include places in NY or Cali on that list in my opinion. I see the kind of returns people in those states are getting and the lengths they are having to go through to get them and it is laughable. I guess it just depends on what they are comparing the cities to, and of course it's just an opinion, but I think it's a very silly one.

@Heather H. I did click through but I didn't see where sMVD or WA were defined. 

Are these articles using leading indicators or trailing indicators? What is good for a realtor is not necessarily good for a home buyer or investor.

Thanks for your insight everyone!

@Michael Guzik   I had similar thoughts, but of course it's not just the affordability of houses they look at - it's the change in affordability compared to changes in other economic indicators. I thought San Antonio was sustainably  growing though, so I would think that wages, employment, etc would be rising right along with property prices, so that's why I was curious to get the opinions of people who know SA.

Las Vegas is booming but I wouldn't be surprised if Fitch is right about the property being overvalued there. There is a lot of job growth, but much of it seems to be in construction, which is cyclical and one reason that LV goes through so much boom and bust. SA has historically been steady though (as far as I understand), so I was surprised to see it on that list.

Fitch's methodology is very opaque, as you found. The analysis is based on nominal income growth, population growth, unemployment, change in rental prices and change in home prices, but I couldn't find details on the criteria or calculations within each of those categories. I believe it's based on trailing indicators, as they look at the change in value over the past year (as far as I can tell) instead of projections into the future. I also noticed that they didn't define their acronyms, which is frustrating. The percentages that they give on the map are the over-valuation, or percentage  over what they see as what the market value should be. And that's a very good point that what is good for a realtor is not necessarily good for a buyer (whether that buyer is an owner occupier or investor). That's why it is so interesting to get peoples' opinions on these kinds of stats.

I know we can't evaluate their specific results without knowing more about the numbers that go into the calculation, but I was more interested in peoples' opinions on the general conclusions and what people think of the markets that are supposedly overvalued.

@Ned Carey Part of my previous post (above) was meant as a response to your comments - the paragraph starting with "Fitch's methodology..." until the end of the post.

I thought I had added "@" and your name but it must have been accidentally deleted before I hit "post reply". 

Thanks for your insight!

@Heather H. I have seen my market; Baltimore, rated as high for investing because it was undervalued. I have seen it rated low for investing because it hasn't gone up much. 

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