New Report From CoreLogic Finds Overvalued Housing Markets in the East Coast

Find Out if Your Market is Overvalued

Mortgage rates have continued to rise (the average 30-year fixed mortgage rate topped 5.4% this week), up 15 basis points since last week. While this doesn’t seem extremely high, increasing rates affects the affordability of purchasing a home, especially for first-time buyers.  

CoreLogic’s Housing Market Assessment  

CoreLogic examined around 400 metropolitan areas to find which markets were normal, overvalued, and undervalued. What did they find? 65% of markets were overvalued — unsurprisingly, there aren’t many undervalued markets. 

Every major market in Pennsylvania, Washington D.C., Maryland, Delaware, New Jersey, New York, Connecticut, Rhode Island, Massachusetts, New Hampshire, Vermont, and Maine  were overvalued.  

"With robust home price growth since the onset of the pandemic, many markets could now [be] considered overvalued, particularly when comparing the price growth to the rate of local income growth," Selma Hepp, deputy chief economist at CoreLogic, told Fortune in an interview.  

Now, while home prices are still rising and could be overvalued, that doesn’t mean a drastic change in the housing market will happen overnight. Home prices are expected to rise at the current rate for at least the next 12 months. CoreLogic’s prediction of decreasing home prices isn’t expected to begin until late 2022 even early 2023.  

For homebuyers looking for a beacon of hope, our advice is to be patient and continue saving to be prepared for lower home prices in 2023. 

How Mortgage Rates Impact Home Affordability 

First-time home buyers just can’t seem to catch a break. In addition to making purchasing a home more expensive, increased mortgage rates also mean borrowers could lose their mortgage eligibility.  

Rising mortgage rates have some real estate experts predicting that the hot housing market we’ve all been experiencing for the past two years will finally cool off and slow down. A recent survey conducted by Clever Real Estate shows that people are 78% more pessimistic about the real estate market than they were two years ago. This comes primarily from a lack of housing inventory, which has driven home prices up, and rising mortgage costs, which are making every aspect of purchasing a home more expensive.  

CoreLogic reported earlier this month that they predict home price growth to decrease in the coming months. Between March 2021 and March 2022, home prices increased 19.2%, but, over the next 12 months, CoreLogic predicts this number to increase by only 5.0%. This would be a massive change from the double-digit increases we’ve seen since 2020 and should increase buyer confidence.  

The increase in U.S. home prices has quickly outpaced U.S. income growth, which isn’t sustainable for a healthy housing market and homebuyer confidence.  

There’s clear evidence that an average U.S. household can’t afford current home prices. Historically, the average house in the U.S. cost around five times the yearly household income. Today, that rate has increased well past seven times the yearly household income.  

So, what’s going to happen now? Increased mortgage rates are expected to help curb skyrocketing home prices, which will alleviate some of homebuyers' stress. However, higher mortgage rates will also cause rent prices to increase as landlords’ mortgage payments will increase.   

Ideally, housing inventory would increase over the next 12 months as well, but we can only hope.  

As always, we will stay up to date with the latest real estate industry news to help you keep your finger on the pulse of the constant changes in the housing market. 

For more content in the East related to mortgage rates, housing inventory, and industry news read these blogs from The CE Shop: 

Career Longevity Tips for East Coast Real Estate Agents 

The Great Resignation’s Effect on Delaware Real Estate 

Finding Your Niche: Vermont’s Vacation Housing Market