Overpriced housing markets -real estate experts have been aware of this problem for some time and the coronavirus pandemic only made matters worse for large coastal cities where house prices have skyrocketed and the cost of living is ridiculously high. Things have become so bad many people were looking to relocate to inner cities with affordable housing, decent commutes and a more relaxed lifestyle even before the current health crisis. At the moment, the trend is accelerating as life in these cities is not only more expensive, but also riskier when it comes to the chances of being infected with the new coronavirus. Also, people have come to realize that a lockdown trapped in a high-rise is worse than having to shelter in place in a peaceful city where you can afford a house with your own garden.
Let’s have a look at the cities which top the list of the most overpriced area in the US.
San Jose, California
A beautiful city, no doubt about that, but the real estate prices are simply jaw-dropping. San Jose boasts some 369,724 housing units and more than half of those, 208,745, cost over $1 million. People who already own a house there are lucky, but when it comes to renting you will realize just how ridiculously overpriced the city is. The median rent in San Jose is 218% the national average. You have to earn a lot to afford living in this city.
This unsustainable situation was caused by the Silicon Valley boom, but things are rapidly evolving and many high-tech companies are looking to relocate to inner, more affordable cities, taking many jobs with them.
All in all, San Jose is definitely not a good real estate investment at the moment.
Many people are asking if Boise, Idaho is overpriced. Let’s look at the numbers. According to Zillow, the median home value in Boise is $341,449. Boise home values rose 10.3% over the past year and will continue to do so at a more moderate pace.
However, there’s a huge difference between a place like Boise and the large coastal cities mentioned above. Boise is growing, in terms of population and job opportunities. This means there’s a high demand for housing units in Boise, while the offer is quite limited. According to Redfin, in June 2020 a house spent only 11 days on the market before being sold, which is a good indicator of the high demand for houses in the area.
Those who say Boise is overpriced do have a point, but this is a very hot market and home values will appreciate over the next few years, which makes the city a very good investment opportunity. Realtors predict a 5.6% rise over the next 12 months.
If you’re buying to rent, you must know that the rental yield is 8.55%, which is quite a good value.
San Francisco, California
San Francisco is pretty much in the same situation as San Jose. Out of a total 933,904 housing units, 42.3% are valued at more than $1 million. The median price of a house in San Francisco is over $910,000. As for rents, those are 195% of the national average, just slightly better than the situation in San Jose. The cost of living is also quite high. In the metro area $100 will only buy you $78 worth of goods or services.
This makes realtors caution about investing in the San Francisco real estate market. Los Angeles isn’t much better, in case you’re wondering.
New York City
Living in the Big Apple is incredibly expensive. More than 10% of the city’s over 3.7 million housing units cost over $1 million dollars. The medium value of a housing unit is over $457,100, and don’t even think you can get a nice house with a big garden for that kind of money.
If you’re looking to invest in rental property, think again. Rents are currently 153% of the national average, but you might have a hard time finding tenants to even pay out the mortgage on your loan. And, unfortunately, the city is not expected to grow. On the contrary, people are abandoning the city that never sleeps in search of more peaceful surroundings.
The city of Miami is a victim of its own success. Who wouldn’t like to live in Florida? Many did pursue this dream which drove housing prices incredibly high. There aren’t as many houses priced over $1 million, just 4.6% of the city 1,2 million housing units are that expensive, but the median rent is 130% the national average. Also, the cost of living is slightly lower than in places like San Francisco or New York.