When it comes to the national housing market, it all goes back to the rule of supply and demand.
When there is a huge demand and low supply, prices are going to rise. And throw in the high mortgage rates as of late, and you’ll find some areas of the country where homes are being “overvalued.”
In fact, Buffalo, N.Y. ranked in the top five locations where the Real House Price Index (RHPI) said the greatest year-over-year home price hikes have been experienced.
“Whether affordability drifts over or under in the coming months will depend on whether the supply-tightening response to higher rates is stronger or weaker than the demand-softening response,” said Mark Fleming, chief economist for First American Financial Corporation and leader of First American’s Decision Sciences team, in a blog post.
In March 2024, mortgage rates increased and affordability “fell modestly by 0.1%” compared with February, according to the Real House Price Index (RHPI).
“On an annualized basis, affordability decreased by approximately 5%. Two factors drove the year-over-year decline in affordability — a 6.2% annual increase in nominal house prices, according to our First American Data & Analytics House Price Index(opens in a new tab/window), and a 0.3 percentage point increase in the 30-year, fixed mortgage rate compared with one year ago,” said Fleming.
After tracking 50 housing markets in the country, 22 residential real estate markets were overvalued in March, “meaning the median existing-home sale price exceeded house-buying power,” said Fleming.
The report tracked by First American Data & Analytics, revealed that the top five markets with the greatest year-over-year home price increase are: Memphis, Tenn. (+17.7 percent), Boston (+16.3 percent), Providence, R.I. (+15.0 percent), Buffalo, N.Y. (+14.6 percent), and Cincinnati (+14.3 percent).
Fleming noted that the number of overvalued markets increased since July 2022, when just 15 market were considered overvalued.
“In markets considered overvalued, the chronic housing supply shortage is preventing prices from adjusting downward enough to reflect the affordability reality. Additionally, house prices are ‘downside sticky.’ Home sellers would rather withdraw from the market than sell at lower prices,” said Fleming.
Originally published in the Staten Island Advance and distributed by the Tribune News Service.
