MARKETS & TRENDS
PRICE SURGE
Home Price Tsunami COULD OVERPRICED MARKETS INDICATE A LOOMING CRASH?
by Ingo Winzer
f you know why home prices have surged in markets across
I
the country, please let me know. I can understand why prices are up in Boise as a lot of people are moving there from California, and in Austin, a lot of people are moving there from everywhere. But why are prices up 13 percent in Reading, Pennsylvania, where people are actually leaving? Or why are they up 10 percent in Balti- more, where the population is flat? And don’t tell me it’s because interest rates are so low; they’ve been near record lows the last three years. It’s got to be some weird pan- demic-related phenomenon, which means that we have no idea how long it will last or what will happen afterwards. My own guess - no proof - is that this surge won’t last long; in most markets, home prices will not be permanently higher and in mar- kets with the biggest boom there will be a bust, maybe a bad bust. Here are 10 markets most likely to crash, although not right away. If you plan to invest in these markets, be sure you understand the risk you’re taking. The ‘income price’ shows where home prices would be if they cor- respond to local income. It’s been an infallible guide to over-priced markets. Once actual prices exceed the ‘income price’ by more than 25 percent or so, the risk of a crash starts to rise. Remember that the first sign of a tsunami is when the water rushes out . •
Home Price Excess Over Income Price
Home Price Increase
29% 90%
Boise, ID (pictured)
19% 53%
Phoenix, AZ
18% 53%
Tacoma, WA
13% 51%
Fort Lauderdale, FL
16% 49%
Tampa-St. Petersburg, FL
22% 46%
Ogden-Clearfield, UT
21% 44%
Spokane, WA
22% 44%
Austin, TX
18% 41%
Stockton, CA
12% 41%
Las Vegas, NV
LOCAL MARKET MONITOR, CARY NC
Ingo Winzer is president of Local Market Monitor, which analyzes conditions in 300 U.S. markets, using such economic data as home values and growth in employment and population. Winzer, who has analyzed real estate markets for more than 20 years, was a founder and executive vice president of First Research, an industry research company that was acquired by Dun & Bradstreet in March 2007. He is a graduate of MIT and holds an MBA in finance from Boston University. Winzer resides in Cambridge, Mass. www.localmarketmonitor.com
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76 | think realty magazine :: november 2021
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