The real estate bubble that burst in 2006 took six additional years to entirely deflate, with home prices hitting rock bottom in 2012. But by 2014, home prices, on average, have returned to their pre-bubble norms.
And with the economy growing only modestly, and average incomes growing slowly, there isn’t a lot of reason to expect that home price appreciation will do much more than keep up with inflation in coming years. But that’s on a national level, and local markets behave much differently. In fact, there are several markets in America where analysts argue that–when compared to historical trends, incomes, and rents–current prices look overvalued.
Real estate data firm Trulia compiles statistics on both the amount of home price appreciation in each U.S. metro area as well as estimates of how overvalued homes are in those areas compared with historical trends. According to Trulia, even if many of these metro areas appear overvalued, there’s no reason to believe that we should expect a crash in prices anytime soon, as we’re nowhere near the price levels we saw in the years leading up to the housing crisis. At the same time, prospective buyers in these areas should realize that real estate is pricey there, and perhaps temper their expectations for price appreciation to continue indefinitely.
By combining Trulia’s estimates on cities with overvalued real estate with figures on the speed at which prices have gone up year-over-year as of August 2014, we present the 13 hottest real estate markets in the country:
1 Austin, Texas
Austin
Dell's home town, dubbed Silicon Gulch, has been a hotbed of tech startups for a couple of decades now, a trend accelerated over the past five years by the annual South By Southwest conference that draws entrepreneurs and investors from all over the world. "There is definitely a boomlet going on in Austin," observes Silver. "It's a great place for startups to get visibility." And for techies to get jobs: Listings on Dice are up 16% over this time last year.Year-over-year home price appreciation: 11.9%
Overvaluation: 19%
2 Riverside-San Bernardino, Calif.
Year-over-year home price appreciation: 13.8%
Overvaluation: 11%
3 Los Angeles, Calif.
Year-over-year home price appreciation: 8.9%
Overvaluation: 15%
4 San Francisco, Calif.
Year-over-year home price appreciation: 11.2%
Overvaluation: 12%
5 Orange County, Calif.
Year-over-year home price appreciation: 6%
Overvaluation: 15%
6 Miami, Fla.
Year-over-year home price appreciation: 15.6%
Overvaluation: 5%
7 San Jose, Calif.
Year-over-year home price appreciation: 10.4%
Overvaluation: 10%
8 Oakland, Calif.
Year-over-year home price appreciation: 12.4%
Overvaluation: 7%
9 West Palm Beach, Fla.
Year-over-year home price appreciation: 14.5%
Overvaluation: 5%
10 Houston, Texas
Houston, TX
They say all things are bigger in Texas. And now Texans can include what they pay for rentals.Year-over-year home price appreciation: 10.4%
Overvaluation: 8%
11 Honolulu, Hawaii
Year-over-year home price appreciation: 6.7%
Overvaluation: 10%
12 Denver, Colo.
Year-over-year home price appreciation: 9.4%
Overvaluation: 7%
13 Portland, Ore.
Year-over-year home price appreciation: 8.5%
Overvaluation: 6%
