Where Housing Markets Are Most Overvalued — and Where Deals Can Still Be Found
- annarwert
- Mar 17
- 3 min read
Home prices have skyrocketed over the last decade, with affordability becoming an increasing concern across the country—especially after the rapid price surges during the pandemic. In many regions, high mortgage rates and limited housing supply are only making things more difficult for buyers.
For those looking to stretch their dollar, the Midwest may offer some of the best opportunities, while California remains the prime example of overvalued housing markets. However, the Golden State isn’t the only place where home prices have far outpaced local buying power.
A recent analysis from First American Financial Corp. examined affordability by comparing local income levels, median home prices, and prevailing mortgage rates. The findings highlight just how misaligned some housing markets are with what residents can reasonably afford.
The Most Overvalued Housing Markets
As of March 2024, several cities in California ranked among the most overvalued in the country, with median home prices far exceeding what the average local household could afford.
Los Angeles: The median home price stood at $923,750, while the typical resident could afford just $413,108—a staggering 124% gap between buying power and actual prices.
San Jose: Despite economic shifts, housing remains prohibitively expensive, with a median home price of $1.43 million, nearly double the local buying power of $722,849 (98% overvalued).
San Diego & San Francisco: These cities aren’t far behind, with median home prices exceeding affordability by 80% and 76%, respectively.
Soaring housing costs have played a major role in California’s ongoing population decline, as many residents relocate to more affordable states.
The Midwest’s Undervalued Housing Markets
Meanwhile, in parts of the Midwest, home prices remain well below what local incomes suggest buyers can afford—creating opportunities for those looking to enter the market.
Detroit: The median home price was $216,126, which is 44% below local buying power ($388,258). Once struggling, the city is now experiencing a surge in revitalization and new development.
Cleveland: Homes were listed at $182,500, compared to an affordability threshold of $310,572, making them 41% undervalued.
Pittsburgh: With median home prices at $188,100, properties were still 39% below what buyers could afford($310,802).
Economists point out that while prices in some regions remain accessible, many prospective buyers nationwide are still feeling the pressure of rising costs and high mortgage rates.
Why Homeowners Are Staying Put Longer
Housing affordability isn’t just affecting buyers—it’s also keeping many homeowners from selling. Research from Redfin Corp. found that homeowners are now staying in their properties nearly twice as long as they did in 2006, when the median tenure was 6.5 years.
By 2020, that number had climbed to 13.4 years, and while it has since dipped slightly, it still sits at 11.9 years as of last year.
As affordability challenges persist, some cities are reconsidering zoning policies and exploring new ways to address housing shortages. Whether these efforts will ease affordability pressures remains to be seen—but for now, some regions remain far more accessible than others.
“Americans who already own homes benefit from rising values and can consider themselves lucky they broke into the housing market while they could still afford it,” said Elijah de la Campa, senior economist at Redfin. “On the other hand, price appreciation makes the prospect of buying a new home daunting or even impossible for many people who want to move.”
As affordability challenges persist, some cities are reconsidering zoning policies and exploring new ways to address housing shortages. Whether these efforts will ease affordability pressures remains to be seen—but for now, some regions remain far more accessible than others.
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