The 4 Most Overpriced U.S. Housing Markets

A great deal has changed since the housing bust of last decade. No longer are many markets in the Southwest hugely underpriced due to high foreclosure rates. Instead, most of the country has since normalized — and in some big-city markets, home prices are back at pre-recession peaks. While the average American home is still undervalued by approximately 3%, homes in some of the biggest metropolitan areas are actually overvalued by up to 19%. (See also: You Shouldn't Buy a Home If…)

If you're considering purchasing a home in the coming months, it behooves you to know which markets are overpriced. Here's a look at the four most overpriced U.S. housing markets.

Denver, Colorado

While Denver's home market is only overpriced by about 7%, it's nearing unaffordable for many of the city's residents. In May, housing in Denver cost, on average, 33.64% of income. In a balanced market, that number is closer to 30%. This means that residents are spending more money on housing, so they are spending less on other things, like food and entertainment. Denver isn't yet unaffordable, but you may find it hard to purchase a home there unless your income is well above average for the area.

Honolulu, Hawaii

While Honolulu no longer ties with New York as the most overpriced city in America when it comes to housing, homes there are still overvalued by about 10%. Hawaii is known for its high cost of housing, caused in part by the fact that there is a limited amount of land available for construction. In addition, nearly all building and repair materials must be imported, which makes it more expensive to build and maintain homes. If you're buying a home in Honolulu, keep in mind that you're likely to pay inflated local prices.


While it's an oversimplification to say that all homes in California are overvalued, most of the large metropolitan areas have significantly overpriced housing. Los Angeles and Orange County tie at the top of the list, with houses overvalued at 15%. San Francisco is next, at 12%, followed by Riverside-San Bernardino at 11%, San Jose at 10%, and Oakland at 7%. California has long been known for its high cost of living, and it doesn't look like that will change anytime soon.


Texas is a state with some significant disparity when it comes to home value. Homes in at least a couple of metropolitan areas, though, are overvalued. In fact, Austin topped Trulia's most recent list, with houses there overpriced by 19%. Houston also made the top 10, though homes there are only overvalued by 8%. These two cities are growing quickly — some may even say that they are experiencing something of a renaissance. Growth like that almost always causes home prices to go up, but when it happens this fast (especially in Austin), there may come a time when the bubble has to burst.

Does It Matter?

Whether your local housing market is overvalued may matter more to certain types of buyers. If you're planning to live in a home for a long time, for example, you may be willing to pay a bit more. Or, if it's cheaper to buy a house than to rent one, then whether your housing market is overpriced will be less of a concern.

If, on the other hand, you're getting into real estate as an investment (or you hope to resell within a few years), you'll care a lot more about what's happening in your housing market.

In general, however, if you're ready to buy a home and can comfortably afford to do so, then go ahead — interest rates are low and it may yet be possible to score a great deal.

Are you looking to buy a home in one of the overpriced markets? How do you think about your home's value as you consider the future?

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