Moody's Sees Half Of America's Housing Market As 'Significantly Overvalued,' Here Are The 3 Worst Areas

The average house price has been rising rapidly nationwide. According to the St. Louis Fed, the median home sales price is $440,300. That's an increase of $70,500 from just a year ago.

Due to the pandemic's huge impact on mortgage rates in 2020, demand increased as homebuyers sought to take advantage of historically low rates.

With the assistance of mortgage lender North American Savings Bank NASB, which provides self-employed borrowers with loans and mortgages without requiring a tax return, the pandemic also forced consumers to shift spending to housing and pushed more millennials, entrepreneurs, and homebuyers toward homeownership.

At the same time, there is a shortage in housing production and homeowners have been hesitant to offer their properties. Housing supply decreased through 2021, then in 2022 housing inventory started to increase.

One of the largest seller's markets in history developed as a result, though that may be changing as mortgage rates rise and the supply of homes increases.

National housing specialists and economists are observing home prices decline across the nation, with some geographical areas plunging considerably faster than others. As the interest rate continues to climb in the U.S., concerns over a housing market collapse intensify.

Also Read: Analyst Remains Bearish On Real Estate iBuyers: 'Fundamentals Are Going To Turn Worse Before They Get Better'

There are a variety of predictions for how severe and widespread home price losses will be in the years running up to 2023 and beyond, but one economist anticipates a national decline in home prices of up to 5%.

But what if the country's economy falls into a recession? Then this forecast now calls for a 5%–10% reduction in national prices.

That is what Mark Zandi, the chief economist of Moody's Analytics predicts.

As of right now, 210 home markets nationwide are "significantly overvalued," or overvalued by more than 25%, according to a Moody's study.

Moody's forecasts a 5% to 10% decline in property prices in such markets. If a more serious downturn occurs, home prices in those areas may drop by 15% to 20%.

Boise, Idaho is at the top of the list of the 210 housing markets that Moody's identified as "significantly overvalued" (out of around 400 regional markets).

With over 70% of properties listed for sale experiencing price cuts in July, Boise led the country with the highest percentage of sellers reducing their prices. Denver, Colorado came in second with 58%, and with 56.4%, Salt Lake City, Utah came in third place.