Indeed, large segments of the housing market may be overvalued and headed for price crashes soon, Moody’s Analytics said in a recent commentary. The overall market is valued 25% higher than it should be, economists at Moody’s said, but the housing bubble isn’t spread evenly: Large metro areas and large swathes of the southeast and the mountain west are especially overpriced, as the map below shows. For example, homes in Myrtle Beach, South Carolina, were 70% overvalued, and ones in Boise, Idaho, were 77% overvalued, according to the analysis. Moody’s determined fundamental real estate values by estimating long-run statistical relationships between house prices, and wage and salary income data. There are ample indications that the formerly high-flying housing market is losing altitude. Home sales have been on a six-month slide and are down 20% from a year ago, according to the National Association of Realtors. Prices are starting to follow suit, data from Redfin shows—more sellers are cutting prices, and homebuyers are facing fewer bidding wars. The main culprit: higher mortgage rates. The average rate for a 30-year fixed rate mortgage topped 6% last week for the first time since 2008, data from Freddie Mac and the Mortgage Bankers Association shows. That’s only added to the misery of homebuyers, who were already looking at sharply higher monthly mortgage payments because of soaring home prices. More and more are simply giving up on buying a house for now. Have a question, comment, or story to share? You can reach Diccon at dhyatt@thebalance.com.
