Key Takeaways:
- The most overvalued markets to purchase a home tend to be located in California, but also include popular vacation home markets in Hawaii, tech-centered Seattle, Washington, and pandemic-era “Zoomtowns” including Greeley, Colorado, and Boise, Idaho.
- The most overvalued markets to rent a home mostly include markets in Hawaii, California, New York, Florida and South Carolina.
- You’ll pay more to buy a median-priced home versus renting in several California MSAs as well as in Hawaii, Washington, Colorado and Utah.
In the pre-pandemic days of late 2019 and early 2020, on a national level the U.S. housing market was reasonably balanced. With a 30-year, fixed-rate mortgage rate of 3.6%, the typical homeowner was paying just 22% of monthly per capita income on mortgage payments. Meanwhile, the typical tenant was paying a much steeper 33% of monthly per capita income on rent, thereby providing a great incentive to dive into homeownership.
By the end of 2023, while the share of monthly per capita incomes paid by tenants to landlords rose just a few percentage points to 36%, for homeowners it soared to 39%. This was mostly due to rapidly rising home prices as well as mortgage rates briefly jumping to nearly 7.8% before gradually falling. Most recently, rates have been ranging from about 6.6% to 6.9%
As these are national figures, these ratios can vary widely between markets, with some homeowners paying up to two-thirds or more of local per capita incomes for…
