BrokerPulse

RealTrends Q32021 BrokerPulse sees brokers still optimistic about the market, wary of competition and wondering when inventory will rise.

2021 RealTrends Brokerage Compensation Report

For the study, RealTrends surveyed all the firms on the 2021 RealTrends 500 and Nation’s Best rankings, asking for annual compensation data for the 2020 calendar year.

Knock.com’s Sean Black on the transaction revolution

Real estate is on its third revolution, from the digital revolution of the early 2000s to the information revolution kicked off by Trulia and Zillow to today's transaction revolution.

Newsletter

The RealTrends BrokerSource and HousingWire OpenHouse newsletters deliver twice weekly information on trends, strategies, analysis, people, and news shaping the real estate industry.

Housing Markets Are Peaking, With Some Bubbles Reported

Housing Markets Are Peaking, With Some Bubbles Reported

Buy vs. Rent Index Shows Dallas and Denver among the metros that are “overheated.”

U.S. metropolitan residential real estate markets are peaking and some cities are in another pricing bubble, according to the latest national index produced by Florida Atlantic University and Florida International University faculty.

The Beracha, Hardin & Johnson Buy vs. Rent (BH&J) Index estimates wealth creation by way of homeownership and equity appreciation versus renting and reinvesting in more traditional financial assets. Thus, by default, the index also measures the pressure on the demand for homeownership. Scores approaching one indicate strong downward pressure on the demand for ownership.

Two metropolitan areas Dallas (.92) and Denver (.77) are rapidly approaching an index score of one. “Both Dallas and Denver are significantly overheated,” said Ken Johnson, Ph.D., one of the index’s creators and associate dean and professor in FAU’s College of Business. “Residential real estate prices in Dallas are significantly above their long-term pricing trend, and I anticipate pricing corrections in the near future.”

Strong economies in Dallas and Denver have buoyed property prices beyond their fundamental levels for a sustained period.

“Prices are still appreciating in both metros but at a decreasing rate, suggesting that the current upward pattern in property appreciation is nearing an end,” said Eli Beracha, Ph.D., co-creator of the index and director of the Hollo School of Real Estate at FIU.

Of the 23 cities in the BH&J Index, 20 trended toward rent territory last quarter, implying these markets became slightly more renter friendly in terms of wealth creation. Interestingly, three metro areas – Honolulu, Miami, and Seattle – which have been some of the hottest real estate markets in the country, have trended marginally back toward ownership territory.

“This does not mean that these markets are exhibiting clear buy signal but rather they appear to be pulling back from the brink as buyers begin to negotiate more aggressively in these areas,” said William G. Hardin, Ph.D., director of FIU’s Jerome Bain Real Estate Institute and associate dean of the Chapman Graduate School of Business.

It is hard to say exactly what is going to happen this time around, said Johnson. Residential cycles are a relatively new phenomenon in most parts of the country. However, markets are going to experience pricing events, he said.

“These events could be as benign as flattening prices and extended marketing times in less overheated cities to significant price declines in the more overheated metros,” Johnson said. “We are nearing the peak of the current residential cycle. The ship is turning once again.”

The BH&J Index is publish quarterly and is available online at http://business.fau.edu/buyvsrent. Due to data availability and the time necessary to calculate the most current index values, the index is produced two months after the end of the quarter.

Most Popular Articles

Where is the housing market headed?

Rising incomes, low interest rates and all other factors, including the balance between families looking for housing and the availability of housing, point towards a continuation of the strong housing market of the last 15 to 18 months.

Oct 18, 2021 By

Latest Articles

Abortion, marijuana laws play a role in relocation decisions

People take the politics of a place into consideration when deciding where to move, but other factors including housing affordability and access to jobs and schools take priority, Redfin study shows

Oct 19, 2021 By