NEW YORK–Should the housing market see a price collapse, 20 U.S. cities are going to be hardest hit, according to one forecast.
Home prices remain 34% higher than they were two years ago, with prices that have continued to grow month-on-month in April, according to the latest data published by the Federal Housing Finance Agency. But those home prices have also grown disproportionately in certain areas, leading some to raise concerns of a potential housing market crash, noted Newsweek.
Mark Zandi, chief economist at Moody's Analytics, told the publication “the most overvalued markets are in the South and Southwest," areas where home prices got "juiced up by remote work" during the COVID pandemic.
20 With (Potentially) Less Plenty
According to Moody's Analytics, these are the cities with the most overvalued homes in the nation:
- Boise City, Idaho
- Colorado Springs, Colo,
- Las Vegas
- Phoenix
- Coeur d'Alene, Idaho
- Tampa
- Atlanta
- Fort Collins, Colo.
- Sherman, Texas
- Jacksonville, Fla.
- Idaho Falls, Idaho
- Lakeland, Fla.
- Greeley, Colo.
- Longview, Wash.
- Charleston, S.C.
- Albany, Ore.
- Denver
- Clarksville, Tenn.
- Greensboro, N.C.
- Charlotte, N.C.
"Carolinas, Atlanta, down into Florida, parts of Texas and then the Mountain West. You could draw a line from Boise all the way down to Phoenix and Tucson —and all the major metropolitan areas on either side of that line are meaningfully overvalued," Zandi told Newsweek.
The Heat in the Sunbelt
Thomas LaSalvia, senior economist at Moody's Analytics, confirmed to the publication that things are worse in "many places in the Sun Belt where there has been some migration over the last couple of years, and really those with sustained migration over the last couple of decades."
LaSalvia further told Newsweek that many of the out-of-state people who migrated to these cities came with "large savings accounts from selling their home in a higher-priced area or large remote work incomes" to areas where the local population had a substantially lower income. With this money, they pushed local buyers out of the market in bidding wars for purchasing homes.
In time, this dynamic also attracted "flippers," Zandi told Newsweek, who flocked to various markets with the idea of buying a house only to sell it "for a quick buck."
Cooling Expected
"But if that was kind of more of a one-time shock, then future demand is going to have to come from those locals," says LaSalvia, explaining that the conditions that have led to the housing market heating up in those cities cannot be sustained in the long term.
LaSalvia and Zandi both told Newsweek they do not believe the market is heading towards a crash, but they do expect the market to cool down.
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