Dive Brief:
- Out of 100 top U.S. housing markets, CoreLogic designated 14 as overvalued during the second quarter of 2015 — double the number at the end of the first quarter.
- The CoreLogic index labels a market as overvalued when its home prices are more than 10% higher than the long-term sustainable level, based on the region's per capita income level.
- Texas dominated the list of overvalued markets, with five of its six top housing markets being labeled as overvalued. Those markets include: Austin-Round Rock; Houston-The Woodlands-Sugar Land; Dallas-Plano-Irving; San Antonio-New Braunfels; and Fort Worth-Arlington.
Dive Insight:
CoreLogic attributed the bump in overvalued markets to a lack of home inventory. "Builders are not building enough — they've focused on margins and not scale," said Sam Khater, CoreLogic's chief economist. He said the attention to the wealthier sector of the market has come at the detriment of the more affordable sector, which still has significantly limited inventory available for lower-income buyers.
The overwhelming presence of Texas on the overvalued markets list is a result of steady job growth in the region, the oil and gas boom between 2006 and 2014, and "the absence of the severe boom-bust housing cycle that was seen elsewhere," according to CoreLogic.
CoreLogic offered some good news in its report, as it predicted the gap between home prices and long-term sustainable levels will shrink from its current average level of 3.6% down to 1.5% by the end of 2017.
See the full list of the 14 most overvalued housing markets here.
