The housing market is overvalued in 88% of U.S. metropolitan areas, according to a new report by Fitch Ratings.
The ratings agency said Wednesday that housing was overvalued by 9.4%, nationally, in the second quarter of 2023. The agency said it expects prices to remain elevated, with prices having climbed further in the third quarter.
The increase in home prices has accelerated over the last few years. Despite a rapid rise in mortgage rates over the last year and a half — before easing in recent weeks — home prices have also continued to rise, due to low inventory and strong demand.
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The median price of a home in the U.S. rose in November for the fifth month in a row to $387,600, the National Association of Realtors said on Wednesday.
And with the typical 30-year mortgage rates having fallen below 7%, home prices will likely stay elevated, because inventory is likely to remain low even as demand continues to rise.
The agency also said that in the 88% of the country’s metropolitan statistical areas where homes were overvalued, more than half saw an average overvaluation of 10% or more. “Overvaluation still dominated nationwide,” the report stated.
The top three overvalued metropolitan areas were Charleston-North Charleston, S.C.; El Paso, Texas; and Camden, N.J., according to the report.
But Fitch also said it expects nominal home-price increases to slow, only increasing 0% to 3% in 2024 and 2% to 4% in 2025.