The most expensive cities to buy a home: where is the average price of a house over $500,000?

The cost of buying a home in the United States has been rising at a blistering clip since covid-19 upended everything. Over the course of the pandemic Americans reconsidered where they lived as companies shuttered offices and droves of workers were able to work from home wherever that may be.

The rapid increase in what it costs to buy a home has made nineteen US housing markets overvalued by more than fifty percent. Homebuyers in four of them will find sale prices more than sixty percent above what they would’ve expected to pay had values followed long-term trends. Twenty of the top hundred markets now have average home prices over $500,000.

The most expensive housing markets in the US

Ken Johnson and Eli Beracha, researchers at Florida Atlantic University and Florida International University, respectively, rank on a monthly basis the most overvalued housing markets in the US. They collect open-source data on America’s 100 largest metro areas to score the premium or discount that homebuyers will encounter so that they can better inform their decisions about their real estate investments.

Of the twenty markets where home values have crossed the half-million dollar mark, five of them are overvalued by more than fifty percent according to Johnson’s and Beracha’s research. These include Salt Lake, Provo, Ogden, Austin and Boise, the last of which they found to be overvalued by more than seventy percent. Meanwhile homebuyers in markets like Honolulu, New York and Washington DC were only paying a slight premium over the long-term trend price.

Here’s a look at those where the average home price is over $500,000 as of the end of March 2022.

Housing market beginning to cool

Prices for homes have skyrocketed since the onset of the pandemic, data have them up anywhere between 32 percent and 39 percent higher. The current median sale price of houses sold in the US in the first quarter of 2022 was $428,700 according to the St Louis Federal Reserve. Most economists though agree that the pace of rising prices can’t continue and will at worst level off or rise more slowly.

A recent Fitch Ratings analysis lowered the agency’s prediction for new and existing home sales from at best rising slightly to now experiencing perhaps a mid-single-digit decline in 2022. The high-teens growth during 2021 will drop to around 10 percent increase in prices this year and slowing down further in 2023. There are even those that think prices could drop by up to fifteen percent in some overpriced markets.

There are signs that the housing market is already beginning to cool with the asking price being cut for around twenty-five percent of home listings. This comes as home loan interest rates soared at the beginning of 2022, far exceeding the predicted three percent at the end of 2021 for this year. The past two weeks have seen 30-year fixed rate mortgage rates drop by half a percentage point after peaking at 5.81 percent, the highest since 2008.