This NYC Location Makes the List for Most Overvalued Real Estate Market

Pedestrians walk along Ellicott Street in downtown Buffalo on December 28, 2022 in Buffalo, New York. (Photo by John Normile/Getty Images)

When it comes to the domestic real estate market, everything is based on the rule of supply and demand.

When there is huge demand and low supply, prices will rise. And add to that the high mortgage rates of late, and you’ll find some areas of the country where homes are “overvalued.”

In fact, Buffalo, New York ranks among the top five places where the Real Housing Price Index (RHPI) shows the largest year-over-year housing price increases were recorded.

“Whether affordability rises or falls in the coming months will depend on whether the response to tightening supply to rising rates is stronger or weaker than the response to slowing demand,” he said. said Mark Fleming, Chief Economist of First American Financial Corporation and Leader of First American Financial Corporation. The American Decision Sciences team, in a blog article.

In March 2024, mortgage rates increased and affordability “decreased slightly by 0.1%” compared to February, according to the Real Housing Price Index (RHPI).

“On an annualized basis, affordability has declined by approximately 5%. Two factors drove the year-over-year decline in affordability: a 6.2% annual increase in nominal home prices, according to our First American Data & Analytics House Price Index (opens in a new tab/window), and an increase of 0.3 percentage points. of the 30-year fixed mortgage rate compared to a year ago,” Fleming said.

After tracking 50 housing markets around the country, 22 residential real estate markets were overvalued in March, “meaning the median sales price of existing homes exceeded the purchasing power of the homes,” Fleming said.

The report tracked by First American Data & Analytics found that the top five markets with the largest year-over-year increase in home prices are: Memphis, Tennessee (+17.7%), Boston (+16 .3%), Providence, RI (+15.0 percent), Buffalo, NY (+14.6 percent) and Cincinnati (+14.3 percent).

Fleming noted that the number of overvalued markets has increased since July 2022, when only 15 markets were considered overvalued.

“In markets considered overvalued, chronic housing shortages prevent prices from adjusting downward enough to reflect the reality of affordability. Additionally, property prices are “persistently falling.” Home sellers would rather get out of the market than sell at lower prices,” Fleming said.

Originally published in the Staten Island Advance and distributed by the Tribune News Service.