In a report from forbes.com, the five most overvalued and undervalued cities have been identified. While it may seem that this is caused by a price bubble, it is in reality not an artificial scenario.
According to Fitch Ratings US RMBS Group Director Stefan Hilts, "The issue isn't' that their prices are in a bubble, it's just that prices grew faster than fundamentals. That's why we're worried about these markets."
The most overvalued cities are as follows:
1) Austin, Texas, whose current overvaluation is pegged at 19 percent, according to Fitch
2) Houston TX, specifically the Houston- Sugarland-Baytown area, overvalued by 18 percent
3) Phoenix, AZ, specifically the Phoenix-Mesa-Glendale area, overvalued by 18% percent
4) Riverside, CA, whose overvaluation reached 17 percent, specifically the Riverside-San Bernardino-Ontario area
5) Miami FL, specifically the Miami-Miami Beach- Kendall area, overvalued by 16 percent
On the other end of the spectrum, the top five most undervalued housing markets are the following, according to money.cnn.com.
1) Detroit, MI. The current median home price difference in the city is at -50.08 percent, which happened after the city lifted itself out of bankruptcy.
2) Orlando, FL. The current median home price difference is pegged at -40.84 percent. The city is reportedly deemed enticing because of the warm weather and low-priced houses.
3) Las Vegas, NV. With the current median home price difference pegged at -40.55 percent, the increased number of home constructions have kept homes at reasonable prices.
4) Sarasota, FL. The current home price difference in the area is pegged at -31.03 percent and the surrounding factors, such as job market, weather and home prices, make this an ideal spot for new families.
5) Memphis, TN. Median home price difference stands at -25.55 percent and now the city is open to opportunities for housing and investment.
Even with these metrics, the question that still hovers is the ability of undervalued markets to recover compared to how overvalued markets would be able to rein in the valuations. This still depends on many factors in the long run, according to the ratings agency using current 2015 data.
