Homes are overvalued in most of the US – and the problem is worse in these 5 states

The vast majority of homes in the United States are overvalued, as high mortgage rates and a continued housing shortage push real estate prices even higher.

Homes are overvalued by 11.1% at the end of 2023, a trend that is occurring in approximately 90% of U.S. metropolitan areas, according to a new report published by Fitch Ratings.

However, the increase in homes selling above the long-term average was significantly higher in some southern states.

Tennessee, Arkansas, and South Carolina had the fastest increases in overvalued homes, followed by Montana and Alabama.

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There are several driving forces behind the price hike.

Years of poor construction led to a severe housing shortage in the country, a problem later exacerbated by soaring mortgage rates and expensive building materials.

According to another report published by, the supply of available housing is still down an astonishing 34.3% compared to normal supply before the start of the COVID-19 pandemic in early 2020. ing.

Rising mortgage rates over the past three years have also had a “golden handcuff” effect on the housing market. Sellers, who had locked in record-low mortgage rates below 3% at the start of the pandemic, are reluctant to sell, further limiting supply and leaving eager buyers with few options.

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April 16, 2024 at a home in the Issaquah Highlands area of ​​Issaquah, Washington. (Photographer: David Ryder/Bloomberg via Getty Images / Getty Images)

Fitch said the increase in home listings in certain markets is a welcome sign of “early signs of normalcy,” but “the pace has been slowed by persistently high mortgage rates and rising home prices.” Stated.

Economists predict that mortgage rates will remain high in 2024 and that rates will not begin to fall until after 2024. federal reserve Start cutting interest rates. Still, interest rates are unlikely to return to the low levels seen during the pandemic. Add to that a series of better-than-expected inflation reports earlier this year, and investors are increasingly skeptical that the Fed will raise rates this year.

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Mortgage buyer Freddie Mac said Thursday. Average interest rate for a 30-year loan Last week, it fell to 7.02%. That’s down from a peak of 7.79% in fall 2023, but still significantly higher than the pandemic-era low of just 3%.

For sale sign outside a home in Atlanta

A sign outside a home for sale in Atlanta, Georgia on September 6, 2023. (Photographer: Elijah Nouvage/Bloomberg via Getty Images / Getty Images)

Another Zillow study found that most homeowners say they are nearly twice as likely to sell their home if the mortgage rate is 5% or higher. Currently, the interest rate for about 80% of mortgage holders is less than 5%.

Another study conducted by Redfin found that rising mortgage rates and rising home prices have resulted in lower median monthly home payments. Recorded $2,775 – 11% increase compared to the same period last year.


“The market environment remains challenging for homebuyers, with fewer homes listed and the cost of ownership still rising,” said Ben Ayers, senior economist at Nationwide. “Despite strong demographic and labor market demand fundamentals, rising loan rates and rising prices are forcing many new buyers out of the market.”