According to a recent study by Florida Atlantic University, several North Carolina cities have made the list of the top 100 overvalued homes in the United States.
The study, conducted by Denise Gravatt, Eli Beracha, and Ken H. Johnson, uses open-source data from third-party housing data providers to estimate the degree of over- or under-pricing of a given housing market relative to its long-term pricing trend.
The study uses a simple Housing Index (HI) time trend, developed from the data of companies like Zillow, to establish a fundamental long-term pricing trend for each housing market. The natural log of the HI, rather than the HI itself, is utilized to capture the index percentage change rather than its nominal change in the given housing market over time. This allows for a more accurate estimate of any local housing price trend.
Using this methodology, the study calculates the percentage difference between where housing prices should be (the expected value of HI) and the market's actual HI scores at a given time. Positive values for this calculation represent a premium or the degree of overpricing, while negative values represent a discount or the degree of underpricing.
North Carolina Cities on the List
According to the study, the following North Carolina cities are among the top 100 overvalued homes in the United States:
Charlotte: ranked #5 with a premium of 54.04%
Durham: ranked #16 with a premium of 46.19%
Greensboro: ranked #18 with a premium of 45.58%
Winston: ranked #22 with a premium of 45.11%
Raleigh: ranked #23 with a premium of 43.87%
Do you agree with the findings of this study based on what you are seeing in your local markets? Do you trust a study based on data from Zillow?
Sound off in the comments below or share your thoughts with a colleague in an upcoming CE Class!
"Gravatt, D., Beracha, E., & Johnson, K. A Note on the Estimation of the Degree of Over- or Under-Pricing of Housing Markets Relative to their Long-Term Pricing Trend. Florida Atlantic University.