More than a year later, Atlanta has been overtaken by the Midwestern city.
Detroit is now the nation’s fastest-growing home market, surpassing Atlanta, which had held that title for more than a year. Homes in the Detroit metropolitan area are appraised at 40.79% higher than they were in the past, while home prices in Atlanta are appraised at 40.37% higher, according to researchers from Florida Atlantic University and Florida International University.
Detroit’s emergence as the nation’s most overvalued housing market is likely due to new household formation, said Ken H. Johnson, a real estate economist at FAU’s School of Business.
“While population growth in the region has been relatively stagnant, people are leaving their current households and starting new ones, putting pressure on a housing market that doesn’t have enough homes to support this new demand,” Johnson said.
The report predicts that home prices will likely continue to rise in the near term as rents rise, but Detroit differs from Sunbelt markets such as South Florida, where the housing market is driven by demand from new entrants and a growing population.
Nearly all of the 100 most populous metros are currently selling at a premium, according to the study. Only Honolulu and New Orleans are trading at a discount. Some markets, such as Austin, Texas, one of the most expensive markets over the past few years, are starting to return to long-term price trends. Homes there are priced 11.72% higher in June 2022 compared to 46.7% at the market’s peak.
“Home prices can and will stabilize again. The only question is how local home prices will return to the long-term price trend for a given area,” said Dr. Eli Beracha, dean of FIU’s Hollo School of Real Estate. “Will home prices plummet and bounce back quickly enough to make homebuying less of a concern? Or will home prices plateau and slowly return to the long-term trend for the area, sustaining stock prices but causing substantial problems in terms of homebuying?”
Ideally, housing market prices would be more stable and stay close to long-term price trends, Beracha said, but the past two housing cycles have been marked by dramatic swings instead.
“As a result, we are constantly concerned about either a loss of wealth due to falling home prices or a prolonged period of housing unaffordability,” Beracha said.
Part of FAU’s Real Estate Initiative, the Top 100 U.S. Housing Markets uses publicly available data from Zillow to calculate the extent to which a typical home in the nation’s 100 most populous metropolitan areas is overvalued or undervalued.
