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Have home prices finally peaked? These Western cities have hit ‘inflection point,’ study says

A “for sale” sign is pictured in Salt Lake City on Monday, Oct. 18, 2021.
A “for sale” sign is pictured in Salt Lake City on Monday, Oct. 18, 2021. A new study suggests home prices are “poised to flatten” in five of the “most overvalued markets” in the nation. Those markets include three cities in Utah.
Kristin Murphy, Deseret News

As home prices have continued to rise across the country, especially in the West, a new study suggests prices are “poised to flatten” in five of the “most overvalued markets” in the nation.

Those markets include two cities in Utah and several other metros in Idaho, Texas and Arizona.

That’s according to research released this month by professors at Florida Atlantic University and Florida International University.

Where are home prices peaking?

  • A pricing “crown” is developing in the five most overvalued markets: Boise, Idaho; Austin, Texas; Ogden and Provo, Utah; and Phoenix,” a Florida Atlantic University article published Dec. 2 states. “That’s an indication that home values in those areas may be leveling off.”

“A crowning in prices is common when markets reach the peak of their current housing cycles,” said Ken H. Johnson, a real estate economist and associate dean at Florida Atlantic University’s College of Business, one of the researchers who conducted the study. “It does appear that several areas around the country are at an inflection point.”

  • In September, researchers at Florida Atlantic and Florida International universities ranked Boise, Idaho as the nation’s No. 1 “overvalued” housing market, calculating the premium homebuyers were paying in the 2021 market at 80.6%.

Three Utah cities and other Western metros ranked close behind Boise. Here’s how the top 10 rankings most recently broke out, according to the university’s online tool.

  1. Boise, Idaho, where homes are selling at an 80.51% premium.
  2. Austin, Texas, at a 57.13% premium.
  3. Ogden, Utah, at a 54.46% premium.
  4. Provo, Utah, at a 49.18% premium.
  5. Phoenix, at a 48.94% premium.
  6. Spokane, Washington, at a 47.61% premium.
  7. Las Vegas, at a 47.42% premium.
  8. Detroit, at a 47.28% premium.
  9. Salt Lake City, at a 47% premium.
  10. Atlanta, at a 45.17% premium.
  • “The danger in buying into an overvalued market is that you may have to own the home longer to realize significant financial returns,” said Eli Beracha, a real estate professor for Florida International University. “Once prices level off, reselling the property for a higher return is very difficult.”

2022 housing market predictions

Even though the research out of Florida may give those aspiring to buy a home in the West hope, other predictors don’t see some Western markets slowing down headed into 2022.

  • Boise projections ranked close behind Salt Lake City with a forecasted 12.9% in year-over-year sales growth and 7.9% in year-over-year price growth.

That’s even though Utah and Idaho have already faced record-shattering years as the West’s housing market continues to rage. In Utah, experts have warned of a “severely imbalanced” housing market as demand continues to woefully outpace supply.

Though the housing market has cooled slightly headed into the fall and winter — a typical seasonal pattern — housing experts do not predict a market crash or see any indicators of a “bubble” in today’s market conditions.

  • Unlike what led up to the 2007 market crash spurred the Great Recession — when the U.S. had overbuilt housing and lending practices leading to a subprime mortgage crisis — housing experts say demand continues to outpace supply, especially in rapidly growing areas like Utah, Idaho and other Western states.