U.S. homes are overvalued in 88% of the nation’s metropolitan areas, according to a new report by Fitch Ratings.
The ratings agency said on Wednesday that nationally, home prices were overvalued by 9.4% in the second quarter of 2023. The agency said it expects prices “to remain elevated due to the continued rise in home prices in [the third quarter].”
The increase in home prices has accelerated over the last few years. Despite interest rates rising sharply over the last year and a half, home prices have also continued to rise, due to low inventory and strong demand.
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 mortgage rates falling 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 of 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.
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