Overvalued residential housing markets exist in the Dallas-Forth Worth Area. This is according to a new report by Fitch Ratings. The Wall Street firm said that D-FW-area home prices are 15% to 19% overvalued. The firm has found in its latest Sustainable Home Price Report that prices in about a quarter of U.S. metro areas are 10% or more overvalued.
Overvalued Residential Housing Markets not Affected by the COVID-19 Pandemic
Fitch Ratings found that the COVID-19 pandemic has not affected nationwide home price growth so far. Homebuyer demand is increasing in suburban areas, it said.
Homebuyers are Motivated Varying Interests
It seems homebuyers are showing an increased interest in suburban neighborhoods relative to densely populated urban cities. In turn, those driven by unprecedented low mortgage rates. They have a desire for more spacious locations. In turn, they are connecting this to heightened work-from-home activity. Fitch Ratings senior director Suzanne Mistretta said this in a statement.
Homeownership nationwide rose to almost 68% which was the highest level in more than a decade found at midyear.
Increase Demand Coupled with Decrease in Listed Homes
There is an increase in demand coupled with a decrease in listed homes [is] causing home prices in suburban areas to go up,” researchers have said. Therefore, there is an imbalance of supply and demand in the housing market. This is mainly responsible for the upward trend in home prices.
Median Home Sales Have Jumped
In September, North Texas median home sales prices jumped 10% from a year earlier. They are up 6% year-over-year for the first nine months of 2020.
Overvalued Market was Higher Than the Last Two Years
D-FW home prices are red-flagged for many years due to fast growth, Fitch Ratings. Making the market higher than the last two years, according to a recent estimate.
In the last five years, the median price of single-family homes sold by local real estate agents has soared by more than 40%.
Home prices in some markets could eventually suffer, according to Fitch Rating analysts. This is due to millions of Americans out of work due to the pandemic and ensuing recession.
Underlying Fundamentals Such as Income, Unemployment
Sustainable prices are more connected with underlying fundaments such as income and unemployment, a new research report says. In turn, despite the positive upward course home prices due to low mortgage rates and demand/supply imbalance. Until these economic basics improve and are more in favor of upward home price movements, the Fitch market value decline projection will likely remain at 4% to 5%.”
In the last year, employment in the D-FW area has fallen by about 140,000 jobs. This is according to the most recent estimates.