Depending on one’s perspective on heat, political preference and classic Southern hospitality, the Sun Belt states can be dream destinations, although they hold some of the highest housing premiums in the entire country.
Looking at the most overvalued measured markets, 17 out of 20 are in Sun Belt states, holding housing premiums of over 30%, according to researchers at Florida Atlantic University (FAU) and Florida International University (FIU).
However, the researchers also found that metros in Texas are unique from the other 18 Sun Belt members, and may prove true in having improving options for homebuyers.
Housing premiums in metros that were measured in Texas are some of the lowest across the Sun Belt states, the latest data shows, meaning homebuyers are paying closer to the long-term projected value of their properties.
In El Paso, Texas, end of April data analyzed by the FAU researchers indicate the typical home is 24.20% overvalued compared to its historical average—ranked 50 on FAU’s Top 100 U.S. Housing Markets metro ranking index. Metros that follow are Dallas at 22.17%, McAllen, 19.15%, Houston at 16.02%, Austin at 12.46% and San Antonio at 11.49%.
“The housing market in Texas could be well on its way to moderating and offering buyers a better buying opportunity than other measured metros in the Sun Belt states based on historical pricing trends,” said Ken H. Johnson, real estate economist in FAU’s College of Business, in a statement.
Johnson believes that Austin in particular stands out as a premier option for U.S. residents due to rents trading at a discount in the area, and housing premiums coming in a little bit above its long-term average.
“Rents are often a leading indicator of where home prices will go. Other areas such as San Antonio and Dallas have rents trading at a discount, as well, so it’s likely prices will moderate further in those cities as well,” he continued.
Other cities measured in the FAU monthly index of overvalued markets were Atlanta, which led the list of overvalued markets with the typical home in the area at 40.94%, Detroit at 40.78%, Cape Coral at 37.60%, Las Vegas at 37.55%, Knoxville at 37.41%, Tampa at 36.98%, Palm Bay at 36.05%, Charlotte at 35.45%, Orlando at 35.10% and Lakeland at 35.06%, respectively.
“These markets have led the nation in terms of housing premiums for the best part of a year. However, rental rates in these cities are mostly beginning to moderate as well but remain behind the Texas markets,” said economist Eli Beracha, also from FAU’s College of Business. “It is quite likely we are seeing the beginning of slowing home prices in the Sun Belt states, though time will tell.”
