Southwest Florida, still dealing with widespread destruction from Hurricane Ian, has become the nation’s most overvalued housing market ...
Southwest Florida, still dealing with widespread destruction from Hurricane Ian, has become the nation’s most overvalued housing market, according to researchers at Florida Atlantic University and Florida International University.
The Cape Coral-Fort Myers metropolitan area surpassed Boise, Idaho, as the market selling at the largest premium. As of the end of August, Cape Coral-Fort Myers buyers are paying an average of 70.43 percent above the area’s long-term pricing trend. The average home price is $429,775, but the average property should be selling for $252,176, based on statistical modeling of past sales.
Boise, the most overvalued metro since the researchers began the monthly analysis of U.S. housing markets last year, slipped to No. 2, with buyers paying a premium of 62.66 percent above the area’s long-term pricing trend.
Florida has five markets among the top 10 most overvalued, based on the percent over pricing trends. Aside from Cape Coral-Fort Myers, Palm-Bay-Melbourne is No. 4 (60.42 percent); Lakeland is No. 5 (59.29 percent); Deltona Beach-Daytona Beach is No. 7 (59.19 percent) and Tampa is No. 9 (58.18 percent).
The full rankings with interactive graphics can be found here. The researchers study markets’ long-term pricing trends going back to 1996, with data covering single-family homes, townhomes, condominiums and co-ops.
The main driver of elevated prices in the Sunshine State is strong demand mixed with a shortage of homes for sale, said Ken H. Johnson, Ph.D., an economist in FAU’s College of Business.
“Even with the constant threat of hurricanes, people want to live here in a warm and business-friendly climate,” he said. “Several storms hit the state in 2004 and 2005 and more since then, and there was concern existing residents and transplants may choose to go elsewhere, but the state is as popular a destination as ever. People have short memories when it comes to storms.”
Johnson and FIU’s Eli Beracha, Ph.D., said home prices also are likely to keep rising in Cape Coral-Fort Myers, even in the aftermath of Ian.
“The area already was facing a shortage of homes for sale before the hurricane – and that likely will get worse with so many properties sustaining damage during the storm,” said Beracha, of FIU’s Hollo School of Real Estate. “The properties that are in condition to sell will be that much more valuable.”
In a separate report analyzing many of the same markets, Johnson, Beracha and FIU’s William Hardin measure price-to-rent ratios, which indicate the relative price of homeownership to renting.
“Higher price-to-rent ratios favor renting over owning, on average,” Johnson said. “So it is not surprising to see home prices falling in areas of the country with extremely high price-to-rent ratios and still holding steady in those areas with lower price-to-rent ratios.”
Austin, Texas, has the nation’s highest price-to-rent ratio at 24.55 percent, followed by Ogden, Utah (24.54 percent) and McAllen, Texas (24.39 percent). Renting is far superior to buying in these markets.
In fact, renting beats buying in all the markets surveyed, but only moderately so in metros with some of the smallest ratios, such as Worcester, Massachusetts (3.84 percent), Syracuse, New York (4.23 percent) and Providence, Rhode Island (4.88 percent).
“On average, we expect housing markets with lower price-to-rent ratios to fair better in the coming housing downturn,” Beracha said.