- Florida now contains five of the 10 most overvalued cities in the US, thanks to hoards of newcomers in recent years.
- Tampa, Florida is now the third most overvalued housing market in the country, with buyers paying a 43% premium.
Florida now dominates the list of the most overvalued cities in America, thanks to throngs of homebuyers who, ironically, flocked to the state to take advantage of its affordable housing opportunities.
Of the top 10 most overvalued housing markets in the US, five are now located in Florida, according to a recent study from Florida Atlantic University and Florida International University. That's a big jump from August 2021, when Florida had zero cities that cracked the top 10.
Researchers compared current data on home prices to their long-run trends in order to assess how much of a premium buyers were paying to live in a region.
Tampa, Florida is the now most overvalued city in the state and the third most overvalued in the country, with homebuyers in that area paying a 43% premium on their properties compared to historical rates, researchers said.
Other Florida cities in the top 10 list included North Port, where buyers pay a 43% premium, Cape Coral, which has a 42% premium, Lakeland, which has a 41% premium, and Palm Bay, which has a 40% premium.
Home prices east of the Mississippi river have generally moderated, FAU real estate economist Ken Johnson said in a statement on Wednesday, though he believed prices would stay elevated in Florida and other Sun Belt states.
That's partly due to the slew of homebuyers that have flocked to Florida in recent years to take advantage of the state's affordable housing, which has ultimately increased demand and pushed prices higher.
Florida's population blew past 22 million in 2022, Census Bureau data shows, the largest increase out of any state in the country that year. Home prices in Miami, meanwhile, are up over 10% this year, close to a record high.
"It used to be that you didn't need a big salary to afford a home in the Sunshine State, but those days are over because this has become a market mostly for move-up buyers and empty nesters," Johnson said in a statement earlier this year. "Florida's relatively low incomes should make housing affordability a key issue for a long time."
It could take years for prices to return to the long-run trend, researchers said, pointing to indicators like price-to-rent ratios in the region, which suggest home prices will remain stable over the short-term.
Other experts have also warned that housing affordability likely isn't improving anytime soon. High mortgage rates have driven up borrowing costs for buyers, while limited housing supply has pushed prices higher.
Affordability will stay pressured until mortgage rates pull back more meaningfully, Redfin's chief economist told Insider, though the firm predicted rates would ease to just 6% by the end of 2023.