I’m afraid to buy a home in these three overvalued markets

The national median house price has grown 34 per cent over the past two years, more than four times the rate of growth between 2018 and 2020. Home prices have risen even more in many housing markets during this period. Home prices in Tampa, Florida, for example, rose 49%, while Austin, Texas, saw a 59% increase. With home prices rising so rapidly, it’s no surprise to hear that several housing markets are overvalued and put homeowners and investors at risk on a pullback.

Buying real estate in an overvalued market makes sense if long-term demand and a lack of new home or new home space are the main factors driving price growth. But many overvalued markets are not. That’s exactly why I’m afraid to buy real estate in these three markets.

Man thinking in front of computer.

Image credit: Getty Images.

Miami, Florida

Miami, Florida is a hotspot for tourism, international investment and institutional investors. Its tropical climate, beautiful beaches, proximity to other countries, vibrant nightlife and diverse communities have made it a popular place to work and live for decades. But over the past two years, more and more residents of the city have moved in.according to redfin tunaMiami was the No. 1 city to relocate for the second quarter in a row, with the majority of residents coming from New York City.

Immigration is a good thing – it means increased demand for things like housing, restaurants, retail and other real estate.But Miami also faces many challenges, including environmental challenges It’s like a flood that puts the city’s future in question. It’s also the most unaffordable housing market in the U.S., making it difficult to generate a good return on investment.

Finally, Miami’s real estate market has historically been known for being well-supplied, especially condos and high-end luxury homes, both of which are showing signs of slowing as mortgage rates rise. I think today’s market tightening will be short-lived as reducing buying will increase supply again.

Boise, Idaho

Boise, Idaho has been in the top five fastest growing real estate markets for several years in a row.If not, it’s one of the hottest This The U.S. real estate market is hottest as people from western cities move to fast-growing areas. According to a study done by the Florida Atlantic School of Business, Boise, Idaho, is the most highly valued city in the United States, with an estimated current value that is 72% higher than expected price.

The city’s average home price is $535,000, while the average rent is $1,500—not a great number if your goal is to own a rental property.There is a discussion about Boise housing prices reach the peak, but I’m not quite sure. There is a lot of money pouring into the market and incentives to lure the wealthy, and the ongoing pandemic will only prompt many from high-tax states like California to act. Still, the demand it sees today doesn’t necessarily mean it’s an ideal place to invest.

Austin, Texas

Austin, Texas is fast becoming one of the best new cities to call home. It is the fastest growing city in Texas, with residents increasing nearly 21 percent from 2010 to 2020. With the exception of the metropolitan area around Austin, the number of residents is expected to hit the 3 million mark by the end of the next decade. Like Boise, I think Austin’s current need for housing is well-founded. There are great job opportunities, especially as more companies expand or relocate their headquarters to cities, and housing is in short supply.

but Investor concern Markets, like Boise, have pushed up prices as people try to get a piece of what could well be the next big U.S. city. According to Redfin, competition is fierce, ranking 75 out of 100, and it is the second most overvalued market, with a value 67% higher than expected, according to Florida Atlantic Research.

what will i buy

In the case of these three markets, I would rather put my money into a more affordable market with less competition and better returns.While I wouldn’t personally buy real estate in these cities, that doesn’t mean I wouldn’t invest REIT (REIT) to invest there. In fact, buying shares of REITs that tap into these markets is one of the best ways to benefit from red-hot demand while minimizing my exposure.

REITs have much higher buying margins due to factors such as large amounts of cash, economies of scale, and lower cost of capital, which can improve returns on high-quality real estate that I would never personally be able to buy. Overvalued markets are risky, but that doesn’t mean they can be left alone.