April 12, 2024
Property

Is YOUR home overvalued? Ratings agency Fitch estimates US properties are selling for 10% more than their true value on average – but experts reveal the ten neighborhoods where you can still find a bargain


  • Homes in 88 percent of US metros are ‘overvalued,’ claims ratings firm Fitch 
  • And the problem is only set to worsen with prices predicted to rise 3% next year
  • But separate analysis by has identified the 10 most underpriced areas

American properties are selling for almost 10 percent above their true value, according to a damning new report by ratings agency Fitch. 

Homes in some 88 percent of US metros were ‘overvalued’ in the second quarter of 2023, analysts said – after the median sales price of properties swelled to around $387,000 in November.

And Fitch predicts the problem will only worsen next year, with house prices set to rise by up to 3 percent as expected interest rate cuts pour fuel on the market.

But separate analysis by GoBankingRates suggests buyers can still find a bargain. Researchers at the outlet used data from property portal Zillow to identify the 20 neighborhoods where homes were most ‘underpriced.’

Cape Coral (FL) came out on top, with a typical home there underpriced by around $249,851, according to the analysis. This is because the average home value in the area is $419,840 yet the median property was listed for sale at $169,989 in 2023. 

Researchers at GoBankingRates used data from property portal Zillow to identify the 20 neighborhoods where homes were most 'underpriced'

Researchers at GoBankingRates used data from property portal Zillow to identify the 20 neighborhoods where homes were most ‘underpriced’

It was followed by Eau Claire (WI) and Urban Honolulu (HI) where properties were calculated to be underpriced by $110,875 and $72,819 respectively.

The top five was rounded out by Punta Gorda (FL), San Francisco (CA) and Milwaukee (WI). 

But the neighborhoods appear to be an anomaly compared to the rest of the US after Fitch raised the alarm over overinflated house prices. 

In all the agency expects house prices to rise by between 0 and 3 percent this year before rising again in 2025 by between 2 and 4 percent.

It said: ‘This will continue to impact affordability, particularly for entry-level and first-time homebuyers thereby constraining demand.’

Researchers added that the top three most overvalued markets were: Charleston, South Carolina; El Paso, Texas; and Camden, New Jersey.

Buyers have this year faced the least affordable housing market in recent memory thanks to soaring mortgage rates and still-high property prices.

The average rate on a 30-year fixed-rate mortgage edged towards 8 percent in 2023 – though they have since climbed down to 6.67 percent, according to Government-backed lender Freddie Mac.  

It means an average buyer now faces paying around $800 more per month on their mortgage payments than if they had bought two years ago – when rates were hovering around 3 percent.

Elevated interest rates and soaring house prices mean buyers are facing one of the least affordable markets in recent memory

Elevated interest rates and soaring house prices mean buyers are facing one of the least affordable markets in recent memory 

At today’s rate, somebody purchasing a $400,000 home with a 5 percent downpayment faces shelling out $2,444 per month on a 30-year fixed mortgage.

But had they bought in December 2021 – when rates were 3.10 percent – they would have paid just $1,623.

Yet despite cooling buyer activity, higher rates have failed to pour cold water on America’s red-hot property market as expected. This is due to a widespread shortage of available homes. 

Figures from the National Association of Realtors (NAR) show the median sales price for existing homes – excluding new-builds – jumped to the fifth consecutive month in November to $387,600. It marked a 4 percent increase from the same time last year. 

‘Home prices keep marching higher,’ NAR’s chief economist Lawrence Yun said in a statement, adding ‘only a dramatic rise in supply will dampen price appreciation.’

As a result, most experts echo Fitch’s predictions that house prices will either stay the same or rise next year.

Top 20 most underpriced property markets in the US 

Cape Coral, Florida

Eau Claire, Wisconsin

Urban Honolulu, Hawaii

Punta Gorda, Florida

San Francisco, California

Milwaukee, Wisconsin

Macon, Georgia

Cedar Rapids, Iowa

Baltimore, Maryland

Philadelphia, Pennsylvania

Lake Havasu City, Arizona

Rochester, New York

Asheville, North Carolina

Buffalo, New York

Racine, Wisconsin

St. Louis, Missouri

Muskegon, Michigan

Detroit, Michigan

Harrisburg, Pennsylvania

Akron, Ohio

Source: GoBankingRates 



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