Homes are increasingly running on the expensive side across the U.S., but many of those prices are greatly inflated.
Lack of inventory, largely caused by weak growth in home building since the recession, is the culprit responsible for the 1.8% decline in existing home sales in June compared to May, says Joseph Kirchner, senior economist at Realtor.com.
"Though we continue to see record-high demand, sales of existing homes are up by only 0.7% compared to last year," Kirchner says. That demand is driving U.S. home prices up this summer, with some properties in select states seeing home values rise by 10%-or-more this year (the U.S. median home appreciation growth stands at 6.5% right now.).
Some of those properties overvalued, particularly in specific regions . Are you in a city where homes prices far exceed actual values? These places are the biggest culprits.
Looking to buy a house? Don't make these mistakes:
Watch More with TheStreet:
You may never have heard of it, but Atherton is located in San Mateo County, California, and is as pricey as it gets from a home buyer's perspective. "With a population of approximately 7,000, it's a small, compact town nestled in a bed of a few other small communities in the larger San Francisco Bay Area," says Thomas Espy, real estate editor at Tranio.com. "The Zillow home appreciation price is $6,325,900, and the median sale price is $5,900,000," Espy notes.
Also located near San Francisco, Palo Alto, the heart of "Silicon Valley," has become the home (or at least starting point) of many of the world's leading tech and IT firms, explains Espy. "It's also the destination of enthusiastic computer scientists and engineers striving to begin startups and think up the next big idea," he notes. Those ideas cost big money, as evidenced by home values, which stand, on average, at $3,347,900, according to Zillow. Median sales prices are almost as high, at $3,150,000.
San Antonio, Texas is one of America's most overpriced housing markets, says Keisha Blair, an economist and real estate expert located in New York City. "The CoreLogic Case-Shiller Home Price Index for San Antonio gained 7.8% year-over-year, compared to a 3.7% gain nationally," Blair states. "As a result, San Antonio homes are overvalued by 18.6%, the most of any market in America, according to Fitch Ratings."
Another overpriced housing market is in Boulder, Colo. "In 2016, home prices in Boulder far exceeded the national average coupled with an increase in appreciation rates," says Rachel Ivers, a real estate professional with Boulder-based Keller Williams. "In 2016, homes appreciated by $93,555 followed by three-year appreciation of $141,085 and $208,463 in the last five years." Ivers says there is an "increased demand" to live in Boulder which has a direct effect on the housing market. "The current median home price is $549,600 while the national average is just over $188,000," she notes.
Honolulu offers home owners a "two-fer" bonanza - waterfront properties, which are always high in demand, and a high cost of living from being 3,000 miles away from the U.S. mainland. "Areas with homes on or near the water, which include Honolulu, are high due to buyers paying a premium for waterfront living, and for the views and the amenities that come with living a waterfront lifestyle - boating, beach clubs, infinity pools, as well as the year-round warm temperatures," says Allison Bethel, real estate analyst at FitSmallBusiness.com. "Honolulu is also so expensive due to the cost to import materials and goods from the mainland which increases the cost of living." Right now, the median home value in Honolulu is $672,000, and is expected to grow significantly during the next year, Zillow reports.
Seattle, like Palo Alto, is a high-tech boomtown that offers lush mountainous green vistas and an agreeable counter-culture that appears to younger white-collar professionals, the demographic engine that usually drives home prices higher across the U.S. "Seattle is quickly growing with a strong local economy which has driven home values up significantly," says Bethel. Seattle home values have risen by a whopping 15.2%, Zillow states, and the median home value is $682,000.
New Yorkers know that Brooklyn has become a popular place for both first-time home-buyer and renters, with prices rising to match demand, states Unison Home Ownership Investors, in a new home affordability report. The Flatbush neighborhood is an especially popular place for young people looking to live in Brooklyn. "But in Flatbush, the median New York City household, ages 25 to 44, can afford only 2% of homes with a 10% down payment, for a grand total of 162 homes," the Unison report notes. "However, with a 20% down payment, the same household could afford 15% of homes, a total of 1154 homes."
South Boston is a highly desirable, residential urban neighborhood with a strong sense of history and tradition, Unison reports. "It has a flourishing arts community as well as a family-friendly beach and numerous parks," the company states. Yet in South Boston, the median Boston household, ages 25 to 44, can afford only 24% of homes with a 10% down payment, for a total of 2,307 homes.
"Anaheim, like virtually all overpriced markets, have a low affordability index, meaning that very few households living in that area can afford a home there, based upon typical income-to-value ratios," says Brad Hunter, chief economist at HomeAdvisor. "In fact, Anaheim has one the lowest affordability readings in the country (based on the latest data available, for the calendar year 2016)." Home prices have rocketed higher since the bottom (circa 2011) in Anaheim, with prices in some area now being higher than at the peak of the bubble, Hunter adds. Zillow pegs the median home value in Anaheim at $571,000, with home prices rising 6.3% in the past year.
Hunter says that, like Anaheim and other over-valued markets, Miami residents and outside house hunters have the most difficulty buying a home, based on how much income a buyer earns in the Miami market. Zillow agrees, noting that while median home prices in the Miami area are only $303,000, prices are rising fast, moving up 7% in the past year. Expect those prices to rise as Baby Boomers to flock to sunny southern Florida over the next decade.