A new study says that home buyers may soon get a break because home prices have been going up and up.
Some homes in 89% of U.S. cities are priced too high, but Fitch Ratings says there are “early signs of a correction in the U.S. housing market, as indicated by the uptick in both active and new property listings.” This is based on an analysis of home prices in the first quarter of 2024.
The credit-rating service said that homes across the country were overvalued by 11.5% at the beginning of this year, up from 11.1% in the previous quarter.
The National Association of Realtors says that the median price of an existing home sold in the U.S. in June was $426,900.
A median-priced home, on the other hand, is out of reach for most Americans with the median income, and S&P Global Ratings says that home prices have gone up much faster than incomes over the past 30 years.
Home prices are likely to go down because there are more homes for sale than there used to be. In some areas where the number of homes for sale has gone up, buyers are back out of deals or just aren’t ready to buy yet, which forces sellers to lower their prices. The online real estate company Zillow Z 3.90% ZG 3.96% said that in July, more than 26% of the homes it listed got their prices lowered. Real estate company Redfin RDFN 20.71% said that there were almost 60,000 cancellations of home purchases in August.
There are problems with affordability, like high mortgage rates and high home prices, which slow down the normalization process. This means that home prices will not drop quickly, even though most homes in the U.S. are overvalued.
Here are the five cities where Fitch Ratings said home prices were most excessively high, along with data on home prices that MarketWatch gathered from Redfin:
| Metropolitan area | Annual change in home prices | Median sales price in June 2024 |
| Memphis, Tenn.-Miss.-Ark. | -0.1% | $190,000 |
| Buffalo-Cheektowaga-Niagara Falls, N.Y. | 5.5% | $196,000 |
| Milwaukee-Waukesha-West Allis, Wis. | 4.7% | $218,750 |
| Nashville-Davidson-Murfreesboro-Franklin, Tenn. | 1.7% | $479,000 |
| Raleigh, N.C. | 3.6% | $450,000 |
To be clear, Fitch’s research showed that home prices in the Memphis area were 0.1% lower last month than they were in June 2023. However, Redfin’s data showed that home values in that area were still going up. Redfin data shows that the average price of a home sold in the Memphis area was $190,000.
Fitch thinks that home prices in the U.S. will rise by 3% to 5% in 2024 as well.
“The start of monetary easing should offer some relief to rate-sensitive borrowers,” Fitch said. This is because the Federal Reserve is likely to cut interest rates in September and December.
