Prices Drop In Overvalued Markets as Housing Boom Subsides

In the past year, home price growth has risen four times faster than income growth across the U.S., a cause for concern among economists who long allayed any fears about a prospective housing bubble. But according to Moody’s Analytics chief economist Mark Zandi, a bubble requires speculation-driven price growth paired with overvaluation, something to watch out for as interest rates continue to rise.

A CoreLogic risk assessment of 400 metropolitan areas revealed that 67.9% of regional markets are overvalued and just 24.5% are seeing relatively normal price growth. Home prices are expected to rise another 5.9% throughout the remainder of 2022, but overvalued markets are the most likely to see prices fall, Fortune reports.

Among the 392 regional housing markets CoreLogic measured, 44 markets qualified for the “medium” group, and 22 markets crept into the “high” group. CoreLogic categorized only four markets as having a “very high” likelihood of a price drop: Bend, Ore.; Prescott, Ariz.; Lake Havasu City, Ariz.; and Bridgeport, Conn.

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