Fitch says more than 90% of real estate market is overvalued

While housing supply may increase, House prices still rising According to a new report from Fitch Ratings, more than 90% of markets grew at unsustainable rates in the third quarter of last year.

House prices nationwide are overvalued by an average of 11.1%, up from 9.4% three months ago. As of the end of September, more than 91% of U.S. metropolitan areas were likely considered overvalued, up from 88% in the second quarter. Fitch’s Sustainable House Prices report said.

Rising property values ​​are the main factor contributing to unsustainable growth rates, while other economic signs point to greater stability. rating agencies Examined changes in the Corelogic Case-Shiller Home Price Index against the backdrop of data on rents, employment, mortgage rates, income and household growth to determine the sustainability of the housing market.

While supply shows signs of slow recovery, overpriced market share is still increasing, but inventories are still far from meeting demand, which will quickly impact affordability.

The recent rise in new home listings “suggests the market is slowly moving toward a more liquid market, but the supply of homes for sale remains tight, suggesting the market is gradually thawing,” report authors Iris Xie and Sean Park wrote.still above recent standards It is also an obstacle on the road to greater affordability.

Of all overvalued markets, 58% exceed Fitch’s benchmark by 10% or more.

Winston-Salem, North Carolina, Memphis, Tennessee, and McAllen, Texas are considered the most overvalued metropolitan areas in the United States. Among the 50 largest cities, Memphis topped the list, followed by Buffalo, New York, Milwaukee and Indianapolis. All are overvalued by at least 20%.

On the other hand, Fitch found that only six cities have seen sustainable price growth: Cleveland, Denver, Los Angeles, Dallas-Fort Worth, Miami and Detroit.

On a state-by-state basis, South Carolina’s home prices increased by 6.6% and was the only jurisdiction to be overvalued by more than 20%. Colorado, North Dakota, Michigan and Louisiana are considered sustainable.

Fitch predicts that national home price appreciation will slow to below 3% this year after rising 5.5% by the end of 2023. “This forecast is based on the interplay between multiple factors, such as affordability challenges and tight housing supply, with the latter being the more dominant factor in maintaining positive housing price growth,” the report said.

Meanwhile, real estate brokerage Redfin observed its largest annual increase in the number of new listings coming to market in the first weeks of 2024. However, transaction volumes have declined from 2023 lows, and increased inventory has generated interest but has not immediately translated into sales.Sales, such as Some buyers are taking a wait-and-see attitude.

Elsewhere in Fitch’s analysis, research found that the persistence of unemployment and wage growth led to rising consumer confidence. Xie and Parker said the employment data should support housing demand.Fannie Mae’s latest Gauge home buying sentiment Possible buyer interest is also indicated.

The report also shows that the income required to make monthly mortgage payments is shrinking relative to rental prices due to the recent fall in mortgage rates. If this trend continues, this trend could lead to “a more balanced dynamic between renting and buying.”

Source link

Related Articles

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to top button