Home Prices in the U.S. Are Too High, Especially in These 5 States

Due to high mortgage rates and a dearth of suitable properties, the majority of homes in the United States are overpriced. 90% of U.S. metro areas had 11.1% overvalued homes by the end of 2023, according to a Fitch Ratings assessment. Tennessee, Arkansas, South Carolina, Montana, and Alabama have the worst conditions. The largest rises in housing prices were observed in these states.

These high prices are the result of several reasons. There was a shortage for years since not enough houses were constructed. Growing mortgage rates and expensive building materials made this issue worse. Realtor.com reports that there are currently 34.3% fewer homes for sale than there were prior to the COVID-19 pandemic.

The low mortgage rates brought on by the pandemic are keeping many homeowners from selling, which reduces the number of properties that are available. This dearth of supply makes it challenging for buyers to find affordable homes. Fitch Ratings claims that even if more homes are being listed in some areas, the market is being negatively impacted by high borrowing rates and rising prices. Experts predict that mortgage rates won’t decrease in 2024 until the Federal Reserve does. But they won’t go back to the low levels seen during the pandemic.

The average 30-year loan mortgage rate is at 7.02%, down from 7.79% in October of last year, but still much higher than the 3% rates that prevailed before to the outbreak. Many homeowners will be more likely to sell if their mortgage rate rises to five percent or more. Approximately 80% of homeowners currently have rates that are less than 5%.

According to Redfin, rising mortgage rates and home prices have caused the average monthly housing payment to rise by 11% from the previous year to $2,775. Ben Ayers, senior economist at Nationwide, said, “Buying a home remains difficult due to a lack of listings and exorbitant prices.” Many first-time buyers are unable to afford to enter the market as a result of these barriers.