If you could fold the United States in half, simply looking at the east or west would tell you where the most under- and overvalued residential markets are‒‒if, of course, you’re reading Forbes [1].
The magazine Thursday published its list of the five most undervalued and overvalued markets in America [2], and the results show that the most undervalued markets are between the Atlantic Ocean and Detroit, while the most overvalued begin in Texas and head toward the Pacific.
In overvalued markets, Texas lead the way with a tie for first place between Austin and San Antonio. Both markets suffered the recession only to bounce back with vengeance as the economy started to heal. According to Forbes, both markets are 19 percent overvalued, but that number belies an even greater disparity between gross economic growth and growth in each city’s real estate market.
After busting in the recession, the economies of Austin and San Antonio recovered by 18 and 9 percent, respectively. But home price appreciation rose 41 percent in Austin through the end of 2015, and the current median home price in the capital city is $278,000. Meanwhile, San Antonio’s home prices grew 21 percent during the same time, and the median home price there is now $190,400.
Phoenix, Las Vegas, and San Francisco rounded out the top five most overvalued markets on Forbes’ list. In each of those cities, overall economic growth in the single digits has met with home price appreciation percentages of 49, 52, and 58, respectively.
On the other side of the equation and the other side of the country, New Haven came in as the most undervalued market in America through 2015. According to the magazine, the hometown of Yale University saw its economy and home prices each grow at a flat 2 percent, and the city is considered to be 23 percent undervalued. Also 23 percent below where it should be is Detroit, which still has a glut of inventory and slow economic recovery.
Rounding out the top five undervalued markets are Hartford, where homes are 21 percent below fair market value, Providence (17 percent), and Cleveland, where a 9 percent economic improvement has outpaced the city’s 2 percent growth in housing prices. Cleveland is considered to be undervalued by 16 percent.
According to Forbes, these markets are no surprise when you look at jobs. Where job growth is booming, like in San Antonio’s tech and health sectors, markets inflate; where jobs are down and inventory is plenty, like in Cleveland, prices remain below where they ought to be.