In January 2020, news broke that the novel coronavirus had begun to spread around the world, but while there was no talk of disruption to daily life in the United States, the housing market continued to slowly rise. Average-priced homes were more affordable than renting, thanks to a very reasonable 30-year mortgage interest rate of 3.6% to 3.7%.
At the time, the typical homeowner paid 22% of monthly per capita income in mortgage payments, while the typical renter paid 33% of the same standard to the landlord. For many households, making the switch from renting to owning a home made great economic sense.
Throwing back to the end of 2022, it was a different story for both household groups. The percentage of his monthly per capita income that tenants pay landlords has risen only a few percentage points to his 36%, while for homeowners, principal and interest payments are his 37%. has skyrocketed to %. This is largely due to him surpassing 7% before mortgage rates settled in his mid-6% range. Per capita income is estimated by dividing total population by personal income, using data from the Census Bureau and the Bureau of Economic Analysis.
These ratios vary slightly by market, as these are national medians. Some California homeowners pay up to 67% on principal and interest alone, and renters pay up to 58%. So, given the frequently repeated rule of thumb of avoiding paying more than 30% of a household’s gross income for housing, many metropolitan statistical areas are based on local her per capita income. Overrated.
- The most overrated market for buying a home tends to be in California, but also includes Seattle, Washington, and “Zoom towns” like Boise, Idaho and Greeley, Colorado.
- The most overgrown markets for renting homes are mainly in California and Florida.
- Buying a median home is most expensive than renting a California home. And so are his MSAs in Oregon, Washington, Colorado, Idaho, and Utah.
It’s no surprise that multiple areas of expensive California lead the list of the most overrated housing markets in the country, but the list also includes Boise, Greeley and even Salt Lake City, Utah. It also includes “Zoom Towns” such as, which are areas that have seen a significant increase in remote workers in a short period of time.
If you’re a renter, a few MSAs in California remain on the most overrated list, but add three markets in Florida and New York City.
According to the Department of Housing and Urban Development, households that spend more than 30% of their monthly gross income on where they live have a higher “cost burden.” Health insurance. The 30% rule doesn’t necessarily apply to households with higher incomes and lower debts, but it’s a useful barometer for ranking the costs of living in some of the most expensive housing markets in the country. am.
For this ranking, we have selected November 2022. This is because it is the most recent month with comprehensive data from the US News Housing Market Index. However, a visitor researching various housing markets is advised to check the online interface for updates at least once a month. See methodology here.
overrated homes for sale
If you’re looking to buy a home, the next four MSAs (all in California) are the most overrated because they require a payment-to-income ratio of over 60%, or double the maximum US-recommended rate. I’m here. HUDs:
- San Francisco – Oakland – Hayward – 68.7%
- Los Angeles – Long Beach – Anaheim – 64.2%
- San Diego – Carlsbad – 63.7%
- Riverside – San Bernardino – Ontario (also known as Inland Empire) – 61.6%
The top 20 most overvalued housing markets include not only California’s expensive MSA, but also Idaho, Colorado, and Utah. Some MSAs, such as Myrtle Beach, South Carolina, and Las Vegas, have pay-to-income ratios of just over 40%, but still 10% above the recommended maximum. In particular, even the US median payout rate of 36.6% is too high. This suggests that house prices need to fall further before the market recovers.
Most overrated MSA for buying a home
The San Francisco-Oakland-Hayward MSA ranks as the most overvalued market in the country, but it has several markets, including low foreclosures, low mortgage delinquency, and low rental vacancy rates. has the strength of However, these strengths are balanced by weaknesses such as high housing income ratios and low builder sentiment.
Below are details of the various data points regularly tracked by this MSA’s housing market interface.
The San Francisco MSA’s Composite Housing Market Index of 49.8 is down 8% year-on-year through November and is made up of three sub-indices ranging from 1 to 100, with 100 being the healthiest.
- Demand HMI – 30.5
- Supply HMI – 47.2
- Finance – 71.71
Learn more about these subindexes and the data points they track.
Median home prices here are down 11.1% year-over-year, but are still $1.4 million nationally. The price-to-income ratio stood at 0.49 at the end of 2021, but as mortgage rates began to rise in 2022, the ratio jumped to near his 0.67 by November.
At the moment, there are few signs of financial distress by homeowners, most of whom continue to enjoy mortgage rates below 4% to 5%.
The US News Housing Media Analysis tool interprets sentiment from over 500 US housing news articles each month. Filters allow you to tailor your media results by region, time period, source, or keyword.
For the San Francisco MSA in January, the most popular are locations like San Francisco and California, as well as keywords like rentals, real estate prices, affordable housing, and apartments.
Popular keywords for January were San Francisco, followed by “America”, “Los Angeles”, “San Jose” and “New York”.
There is an overwhelming amount of housing market news each month. Another US News tool helps us understand and integrate a large amount of housing-related media. The system translates language into ‘feelings’ at the end of each working week.
This information is aggregated into integrated, interactive forms that are easy to access and understand. Sentiment scores range from -1 to +1, with articles expressing the most negative sentiment getting -1 and articles expressing the most positive sentiment getting +1.
The 5,000 articles in the image above that mention San Francisco have an average sentiment of -0.04 through January 20, which is more negative than the overall article average of -0.00. However, since mid-January, MSA sentiment has been on an upward trend.
overrated rental housing
If you live in an MSA with an income-to-rent ratio well above the national median of about 36%, given the growing number of potential buyers waiting to decide when it’s the right time to jump into the housing market. When it comes to the overvalued rental housing market, this list highlights several markets in California with booming rent-to-income ratios ranging well over 40% to 58%. is again being led by the Florida market that is
- Riverside – San Bernardino – Ontario (aka Inland Empire), CA – 58.0%
- San Diego, CA – Carlsbad – 48.5%
- Los Angeles-Long Beach-Anaheim, CA – 44.8%
- Orlando, FL – Kissimmee – Sanford – 42.9%
- New York-Newark-Jersey City, NY-NJ-PA – 42.7%
Most overrated MSA for renting a home
Riverside – San Bernardino MSA ranks as the most expensive area to rent a home in as rents are rising faster than local incomes. Still, some key market strengths have been maintained, including housing availability (there is a fair amount of buildable flatland in this part of California), low unemployment, and mortgage delinquency rates.
But its main weaknesses include high rent-to-income ratios, low builder sentiment, and household growth seen at a faster pace than building permits. Let’s take a closer look at the various data points regularly tracked by this MSA housing market interface.
The Riverside MSA Composite Home Market Index of 50.7 fell 2.1% year-on-year through November.
- Demand HMI – 43.0
- Supply HMI – 52.2
- Finance – 57.0
By November, the Riverside MSA’s median observed rent was up 4% year-over-year to $2,554. The vacancy rate, which rose 1.5% year-on-year to a low of 3.4%, could rise in the coming months as new supply enters the market.
owning and renting
Another metric to investigate for potential homebuyers looking to enter the housing market is the difference between cost of ownership and cost of rent for a given MSA. While the difference in these ratios at the national level is about 1%, in other MSAs it can reach 30% or more, and the homeownership market is mostly driven by the demand for a large down payment on your next home. Open to wealthy or existing homeowners with equity.
Production Notes: Table 3 – Rank MSAs in order of greatest difference between ownership and rental payment ratios
The next five MSAs are markets where the cost of ownership is 16% to nearly 38% higher than rental.
- San Francisco, CA-Oakland-Hayward – 38.1%
- San Jose, CA – Sunnyvale – Santa Clara – 30.1%
- Seattle, WA – Tacoma – Bellevue – 20%
- Los Angeles-Long Beach-Anaheim, CA – 19.4%
- Fort Collins, Colorado – 15.9%
The US News Housing Market Index is the most comprehensive collection of data points for the nation’s largest metropolitan area, freely and easily available on the Internet. This data comes from a variety of government and private sources, Me Buttons next to interface headings.
of Demand HMI This includes government data on employment, unemployment, household growth, and consumer sentiment from the University of Michigan, Redfin median home sales prices, and Zillow observed smoothed home rental prices.
of Supply HMI Includes government data on housing supply, rental vacancy, construction costs, construction jobs, builder sentiment from the National Association of Home Builders, and building billing from the American Institute of Architects.
of Financial HMI Includes interest rates and access to credit, government data on delinquencies and foreclosures from Black Knight, and monthly mortgage and rent to per capita income ratios calculated by the index. Monthly mortgage payments assume traditional loans at average monthly 30-year fixed interest rates reported by FreddieMac at a 20% reduction.
Per capita income for each MSA is estimated in November 2022 using a proprietary formula incorporating the most recent annual Census Bureau data for July 2021 (and reported in December 2022). I was. Relative income growth rates for each MSA in the pre-pandemic years 2016-2019 compared to the United States. These years were chosen to avoid the impact of the federal stimulus package granted in 2020 and 2021. This skews the results for each MSA.
