Cities Where Homes are Undervalued, and Overvalued

Homes across the U.S. are undervalued by a mere 2% on average, but at the same time still overvalued by double-digit percentages in some places.  Most home prices were nearly back to normal for the fourth quarter of 2014 after being down 5% this time last year.

The extent as to which areas are undervalued, and overvalued, varies across the 100 largest cities in the country. At the beginning of 2006’s housing bubble, homes were overvalued by a giant 34%, but fell to 14% at the start of 2012.

The more homes are overvalued shows that a bubble might be forming. When a home is overvalued it doesn’t always mean they are unaffordable. Even though Cities like Boston and New York are statistically undervalued, they are still way more expensive than cities like Houston and Austin. It also is all relative towards the cities fundamental like jobs, income growth, and rent.

70 out of the 100 homes surveyed by Trulia are less than 10% overvalued. This is the highest number since the beginning of the recovery. Most homebuyers spend 15% of their income on their housing payments (excluding taxes), which is down from the 22% of the last 25 years.

In that survey Trulia found Austin, Texas as the most overvalued city. Overvalued by 16%! The second city was Orange County by 15%. The following in descending order were Los Angeles, Honolulu, and San Francisco. The median single family home price was $245,000 in2014, and in 2011 it was $189,000. The mean numbers respectively of both years were $251,838, and $311,222.

Austin was more overvalued in 2014 than it was in 2006. This is somewhat due to a property market that hasn’t kept up with the demand, which is helped by a growing jobs market. Other overvalued markets have relaxed a bit on their jobs market the past few years.

Fun fact- most of the undervalued cities were found it be in New England, Ohio, and Connecticut. Most of these cities were undervalued by at least 14%, ranging up to 20%.

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