No matter how much money you have, if you are buying real estate, you may be put off by the idea that properties or the market as a whole are overvalued. No one wants to pay more than a property is actually worth.
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According to Fitch Ratings, home prices in 90% of U.S. metropolitan areas are overvalued, and more than half of them are overvalued by more than 10%.
Several factors are responsible for the high prices, but high demand and limited supply are one major consideration.
Here are five overvalued and overvalued luxury housing markets that even the wealthiest may want to avoid for now.
Hawaii, Kahului, Wailuku, Lahaina
You’d probably expect Hawaii’s housing market to be overvalued: The state is popular and expensive, and Kahului is one of the most overvalued areas in the country compared to local per capita income, according to U.S. News & World Report.
The market, which includes most of the inhabited islands of Maui, Lanai and Molokai, has been hit by a chronic housing shortage due to an influx of wealthy retirees and second-home buyers. According to a U.S. News report, the problem has worsened in the area, and the governor is working to create more affordable options for local and native-born residents.
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San Francisco/Oakland, California
If you’re considering moving to the San Francisco area, one of the most expensive areas in the country, you should know that it’s also one of the most overrated.
Increasing demand and decreasing supply have led to significant price increases in this market: According to Compass’ June 2024 San Francisco Real Estate Report, 17 homes sold for more than $5 million in April, the highest number since May 2022. The Cow Hollow neighborhood had the highest average sale price, at $6.65 million.
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Indianapolis, Indiana
The birthplace of big races and Hoosier hospitality is also home to one of the most overvalued luxury housing markets in the country. Indiana is growing, with more families, young people and entrepreneurs turning their attention to the Hoosier State.
One thing to keep in mind is that the Indianapolis market includes high-priced areas like Carmel, where the average home price is over $556,000, according to Zillow. If you want a luxury home with less hype, consider neighboring markets like Greater Lafayette or Fort Wayne.
Seattle, Washington
If you’re looking for a market with rising home prices, check out Seattle. According to U.S. News & World Report, Seattle is one of the most expensive markets in the U.S. This is due to a higher-than-average payment-to-income ratio.
According to U.S. News, “California is the most overvalued market for homebuying, but the list also includes popular vacation home markets such as Hawaii, tech hub Seattle, Washington, and pandemic-era ‘Zoom towns’ Greeley, Colorado, and Boise, Idaho.”
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Boise, Idaho
It’s one of those pandemic-era “Zoom towns” with an overvalued, overhyped luxury housing market — and it’s the only market in Idaho to make the U.S. News list.
If you’re considering Idaho as your next move, there are plenty of reasons it’s become so popular, but the low cost of living isn’t one of them: according to RentCafe, the cost of living is 5% higher than the national average and 12% higher than the state average.
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This article originally appeared on GOBankingRates.com: 5 Overvalued Luxury Housing Markets for the Wealthy to Avoid in 2024
