One thing about real estate is that your market probably looks nothing like what the national headlines are describing. While almost everyone has seen significant change from the early parts of the year, the specifics vary widely.
While many markets have indeed seen prices fall recently, 64 of the 100 largest markets actually saw monthly price increases between September and October, according to researchers at Florida Atlantic University (FAU) and Florida International University (FIU), who have been tracking so-called “overvalued” regions.
“We hear how slow the U.S. housing market is,” said Ken H. Johnson, a real estate economist in FAU’s College of Business. “But consumers are still buying and selling, and that activity is keeping prices elevated in a lot of metro areas.”
While economists have broadly agreed that a housing correction will depress real estate activity for at least a few months into 2023—and likely longer—the timing and severity will depend on a number of factors, likely leaving some regions struggling while others are only mildly affected.
Johnson and fellow researcher Eli Beracha of FIU’s Hollo School of Real Estate, found that 13 markets are still 50% overvalued from the expected pricing level. Florida continues to dominate the list of overvalued markets, with four cities represented in the Top 10.
Broadly, more overvalued markets are expected to see a bigger drop in home prices, although fundamental strengths from a good job market or population growth can prevent that drop from being as significant.
One market—Atlanta, Georgia—made the Top 10 most overvalued markets but also topped the National Association of REALTORS® list of “Markets to Watch” in 2023, projected to actually see price gains next year.
Atlanta has experienced resilient job and population growth that preceded the pandemic, which might at least partially explain this seeming contradiction. Cities that do not have these fundamental strengths, or saw only recent population and job growth due to transitory pandemic conditions, could see larger price drops.
“Limited supply and strong demand continue to slowly push prices up in most of the country,” Beracha said. “However, there are many signs that we are nearing the peak of the current housing cycle in most metros. We are just not there yet.”
Johnson and Beracha said that looking at the average home value and percentage change in price can provide a picture of a given market that other studies don’t provide, potentially showing where a region currently stands in the housing cycle. They have used a similar methodology to track rental prices.