Housing in Salt Lake City, Ogden and Provo is some of the most overpriced in the country, according to a new study, indicating that U.S. buyers almost everywhere are paying huge premiums as demand outstrips supply.
Researchers at Florida Atlantic University and Florida International University have ranked the Wasatch Front cities near the top of the nation’s 100 largest housing markets, based on home prices coming in 44% to 51% above their expected long-term trends.
Ogden’s stock of single-family homes, town homes, condominiums and co-ops was the third most overvalued in the U.S., the analysis found, with Provo fourth and Salt Lake City eighth position, sliding from seventh in July.
Boise topped the study’s list, with homes overpriced by 81% compared to past pricing history. The Idaho capital has seen explosive population growth since 2010, up 14.6%, and adjoining communities such as Nampa and Meridian now rank among the country’s fastest growing.
But Austin, which ranked second for overvalued homes, “was the real shocker,” said Ken H. Johnson, an economist for Florida Atlantic University’s College of Business and one of the authors. The Texas city’s price premiums jumped by nearly 5 percentage points in a month, from 50.7% to 55.3%.
“Clearly, buyer demand is significantly outpacing supply in Austin and a lot of other areas,” the researcher said in a statement.
The analysis found only four of the largest U.S. cities are seeing homes sell at a discount compared to long-term price trends: Honolulu, Virginia Beach, Baltimore and New York City. Rankings are based on seasonally adjusted data on home values from the real estate website Zillow, extending back to 1996.
The Florida study confirms what most would-be homebuyers in Utah already know: Low interest rates and pandemic-driven demand for homes with more rooms and larger backyards have drawn down housing supplies to historic lows. Razor-thin inventories of homes are pinching sales and bringing offers of $100,000 and $150,000 above listing prices.
Home sales in Salt Lake County declined for a third consecutive month in August, due largely to a dire lack of supply. Median home prices in August were between 23% and 31% above what they were at the same point in 2020, with the median single-family home now selling for just under $550,000 — about $128,000 above the same time last year.
“Competition to purchase a home remains fierce for buyers,” Matt Ulrich, president of the Salt Lake Board of Realtors, said earlier this month.
Shoppers buying at these prices may be jumping in at nearly a market peak, leaving them at potential risk of not seeing significant returns on their investments, according to Eli Beracha, Johnson’s co-author and a professor at Florida International University’s Hollo School of Real Estate.
“In some markets, recent buyers could be stuck for several years if prices level off or fall,” Beracha said. “If they’re buying at near peak prices and the market fizzles, they may have to stay in the homes a lot longer than planned in order to see even reasonable returns.”