Pedestrians walk along Ellicott Street in downtown Buffalo, New York on December 28, 2022. (Photo by John Normile/Getty Images)
When it comes to the national housing market, it all comes down to the laws of supply and demand.
When demand is very high and supply is low, prices rise. Couple that with the recent high mortgage rates and you can see that homes are “overvalued” in some parts of the country.
In fact, Buffalo, New York ranks in the top five locations for the greatest year-over-year home price increases, according to the Real Home Price Index (RHPI).
“Whether homebuyability rises or falls in the coming months will depend on whether the tightening supply response to rising rates is stronger or weaker than the softening demand response,” Mark Fleming, chief economist at First American Financial Corp. and leader of the firm’s decision science team, said in a blog post.
Mortgage rates rose and home affordability “decreased slightly by 0.1 percentage points” in March 2024 compared to February, according to the Real House Price Index (RHPI).
“On an annualized basis, home affordability has fallen by about 5%. Two factors contributed to the year-over-year decline in home affordability: nominal home prices increased 6.2% annually, according to the First American Data & Analytics Home Price Index(opens in new tab/window), and 30-year fixed mortgage rates increased 0.3 percentage points compared to a year ago,” Fleming said.
A study of the nation’s 50 housing markets found that 22 residential real estate markets were overvalued in March, “meaning the median existing home sales price exceeded home-buying power,” Fleming said.
A report tracked by First American Data & Analytics revealed that the top five markets with the highest year-over-year home price increases were Memphis, Tennessee (+17.7 percent), Boston (+16.3 percent), Providence, Rhode Island (+15.0 percent), Buffalo, New York (+14.6 percent), and Cincinnati (+14.3 percent).
Fleming noted that in July 2022, just 15 markets were considered overvalued, but the number of overvalued markets has increased since then.
“In a market that is allegedly overvalued, a chronic housing shortage is leaving home prices unaffordable. Additionally, home prices are ‘trending downwards,’ and home sellers will choose to exit the market rather than sell at a lower price,” Fleming said.
Originally published in the Staten Island Advance and distributed by Tribune News Service.
