Ogden, Provo, Salt Lake City rank in the top 10 most overrated homes
The study shows that Wasatch Front homebuyers may have to wait years to see a return on their investment when the market subsides.
Apartments in Salt Lake City, Ogden and Provo are among the most overpriced in the country, according to a new study.
Researchers from Florida Atlantic University and Florida International University have ranked Wasatch Front cities near the top of the 100 largest housing markets in the country based on house prices that are 44% to 51% above their expected long-term trends.
Ogden’s inventory of single-family homes, townhouses, condominiums, and cooperatives was the third most overvalued inventory in the United States.
Boise topped the study’s list, with homes 81% overpriced compared to previous pricing history. The Idaho capital has seen explosive population growth of 14.6% since 2010, and adjacent communities like Nampa and Meridian are now among the fastest growing in the country.
But Austin, ranked second in overvalued homes, “was the real shocker,” said Ken H. Johnson, an economist at Florida Atlantic University’s College of Business and a co-author. The city of Texas premiums rose nearly 5 percentage points in one month, from 50.7% to 55.3%.
“Obviously, buyer demand is significantly higher than supply in Austin and many other areas,” the researcher said in a statement.
The analysis found that only four of the largest US cities are selling homes at a discount to long-term price trends: Honolulu, Virginia Beach, Baltimore, and New York City. The rankings are based on seasonally adjusted data on real estate values from the real estate portal Zillow, which date back to 1996.
The Florida study confirms what most prospective homebuyers in Utah already know: low interest rates and the pandemic-induced demand for houses with more rooms and larger backyards have pushed housing supply to all-time lows. Razor-thin stocks of homes are pushing sales, bringing offers of $ 100,000 and $ 150,000 above list prices.
Salt Lake County home sales declined for the third straight month in August, largely due to a severe lack of listings. Average home prices in August were between 23% and 31% higher than at the same point in 2020, with the average single-family home now selling for just under $ 550,000 – about $ 128,000 higher than the same point last year.
“The competition to buy a home remains fierce for buyers,” said Matt Ulrich, president of the Salt Lake Board of Realtors, earlier this month.
Buyers buying at these prices can get in near a market high, exposing them to the potential risk of not getting any appreciable returns on their investments, according to Eli Beracha, Johnson’s co-author and professor at the Hollo School of Real Estate in Florida International University.
“In some markets recently, buyers could be stuck for several years as prices slide or fall,” Beracha said. “If they buy at top prices and the market fizzles out, they may have to stay in the houses much longer than planned to get any reasonable returns.”