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Raleigh, Charlotte houses are way overpriced, study says

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Raleigh, Charlotte houses are way overpriced, study says

A study from a pair of Florida universities found that 15 housing markets in the U.S. are overvalued by 50{73375d9cc0eb62eadf703eace8c5332f876cb0fdecf5a1aaee3be06b81bdcf82} or more — including the two largest cities in North Carolina.

Raleigh rings in at No. 14 and Charlotte at No. 11, the researchers found.

“If we’re not at the peak of the current housing cycle, we’re awfully close,” Florida Atlantic University economist Ken Johnson said in a news release announcing the findings.

But just what is an “overvalued housing market”?

The researchers analyzed the percentage difference between a home’s “expected price” and what buyers are actually paying. The expected price is determined by a statistical model that factors in long-term trends, while the actual monthly prices paid comes from the Zillow Home Value Index.

If buyers are paying more than expected, that classifies it as overvalued.

If buyers are getting lower prices than expected, that discount signals an undervalued market.

Here’s how the metropolitan areas in North Carolina rank:

  • Charlotte: Overvalued by 55.25{73375d9cc0eb62eadf703eace8c5332f876cb0fdecf5a1aaee3be06b81bdcf82}. In April, the average buyer paid $372,300 for a home estimated to be worth $239,804.
  • Raleigh: Overvalued by 51.7{73375d9cc0eb62eadf703eace8c5332f876cb0fdecf5a1aaee3be06b81bdcf82}. In April, the average buyer paid $445,219 for a home estimated to be worth $293,494.
  • Greensboro: Overvalued by 40.75{73375d9cc0eb62eadf703eace8c5332f876cb0fdecf5a1aaee3be06b81bdcf82}. In April, the average buyer paid $223,980 for a home estimated to be worth $159,132.
  • Winston-Salem: Overvalued by 39.28{73375d9cc0eb62eadf703eace8c5332f876cb0fdecf5a1aaee3be06b81bdcf82}. In April, the average buyer paid $229,612 for a home estimated to be worth $164,860.

Affordability crisis could get worse

Triangle Multiple Listing Service Executive Director Matt Fowler said he believes these numbers are vastly overstated and disputed the methodology by which the researchers arrive at the “expected price.”

Fowler highlighted another statistic instead — last month, Triangle MLS calculated that the median home in Wake County was selling for 6{73375d9cc0eb62eadf703eace8c5332f876cb0fdecf5a1aaee3be06b81bdcf82} above the price it was listed. Regionally, that figure was at 4{73375d9cc0eb62eadf703eace8c5332f876cb0fdecf5a1aaee3be06b81bdcf82}.

Fowler said Raleigh has a tenth of the inventory that’s considered healthy, contributing to a basic supply and demand crisis.

“It’s not that homes aren’t selling. It’s just the houses are selling so quickly, they’re selling faster than homes can come on the market,” he said. “That will slow with rising interest rates. We’re not quite there yet. We’re watching for it though.”

The research was headed up by Johnson, of FAU’s College of Business, and Eli Beracha, of Florida International University’s Holio School of Real Estate.

They have monthly data on single-family homes, townhomes, condominiums and co-ops dating back to 1996.

A portion of the downtown Raleigh, N.C. skyline photographed, Monday, March 7, 2022. Scott Sharpe [email protected]

Johnson said rising interest rates could help fuel a slowdown after the meteoric climb in home prices amid the COVID-19 pandemic.

“Recent buyers in many of these cities may have to endure stagnant or falling home values while the market settles — and that’s not what they want to hear if they had planned to resell anytime soon,” Johnson said.

Beracha said prolonged affordability issues could afflict growing population areas.

“In the prior downturn, many homes lost half of their values, but I don’t think we’ll see anything close to that this time around,” he said. “Still, it could be painful for many consumers who are buying near the top of the market.”

Fowler said the affordability crisis is accelerating, noting that when it comes to conventional loans for a median home in the Triangle, median income no longer is enough to qualify. He said the housing affordability index has dropped by 30{73375d9cc0eb62eadf703eace8c5332f876cb0fdecf5a1aaee3be06b81bdcf82} in the past year alone.

“That’s brutal,” he said. “It’s never been lower.”

Most overpriced housing markets in the U.S.

Here’s the full top 15:

  1. Boise City, Idaho: 73{73375d9cc0eb62eadf703eace8c5332f876cb0fdecf5a1aaee3be06b81bdcf82}
  2. Austin, Texas: 68{73375d9cc0eb62eadf703eace8c5332f876cb0fdecf5a1aaee3be06b81bdcf82}
  3. Ogden, Utah: 65{73375d9cc0eb62eadf703eace8c5332f876cb0fdecf5a1aaee3be06b81bdcf82}
  4. Las Vegas, Nevada: 61{73375d9cc0eb62eadf703eace8c5332f876cb0fdecf5a1aaee3be06b81bdcf82}
  5. Atlanta, Georgia: 58{73375d9cc0eb62eadf703eace8c5332f876cb0fdecf5a1aaee3be06b81bdcf82}
  6. Phoenix, Arizona: 58{73375d9cc0eb62eadf703eace8c5332f876cb0fdecf5a1aaee3be06b81bdcf82}
  7. Provo, Utah: 57{73375d9cc0eb62eadf703eace8c5332f876cb0fdecf5a1aaee3be06b81bdcf82}
  8. Fort Myers, Florida: 56{73375d9cc0eb62eadf703eace8c5332f876cb0fdecf5a1aaee3be06b81bdcf82}
  9. Spokane, Washington: 56{73375d9cc0eb62eadf703eace8c5332f876cb0fdecf5a1aaee3be06b81bdcf82}
  10. Salt Lake City, Utah: 56{73375d9cc0eb62eadf703eace8c5332f876cb0fdecf5a1aaee3be06b81bdcf82}
  11. Charlotte: 55{73375d9cc0eb62eadf703eace8c5332f876cb0fdecf5a1aaee3be06b81bdcf82}
  12. Lakeland, Florida: 53{73375d9cc0eb62eadf703eace8c5332f876cb0fdecf5a1aaee3be06b81bdcf82}
  13. Tampa, Florida: 52{73375d9cc0eb62eadf703eace8c5332f876cb0fdecf5a1aaee3be06b81bdcf82}
  14. Raleigh: 52{73375d9cc0eb62eadf703eace8c5332f876cb0fdecf5a1aaee3be06b81bdcf82}
  15. Detroit, Michigan: 51{73375d9cc0eb62eadf703eace8c5332f876cb0fdecf5a1aaee3be06b81bdcf82}

This story was originally published June 3, 2022 10:54 AM.

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Mary Helen Moore covers real estate and business for The News & Observer. She grew up in Eastern North Carolina and attended UNC-Chapel Hill before spending several years working in newspapers in Florida. Outside of work, you might find her biking, reading, or fawning over plants.

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