Over-Valued Markets & Under-Supplied U.S. Housing Markets

how to spot over-valued markets and under-valued markets

It is a public benefit to have a housing market that is constantly moving toward equilibrium where supply and demand meet.

how to spot over-valued markets and under-valued markets
Published March 24, 2020

Supply and Demand Imbalance

Housing Tides™ follows the most productive, thriving metropolitan areas in the United States. Perhaps I am stating the obvious, most of the cities have housing that is over-valued and under-supplied. Why is that?

At the root of all this are the local governments which control the pipeline. Anti-growth sentiment and NIMBYism keep the housing market from moving toward equilibrium. Local governments are ineffective in being able to support the development of affordable and attainable housing.

Why We Can't Reach Equilibrium

Building attainable or affordable housing in a quantity that the markets demand is hindered by excessive regulations, slow processing, heavy developer extractions and the protections demanded by the elite NIMBYs. These hindrances drive up the price of housing exceeding the current income levels in these markets.

City councils struggle with affordable housing policies that rarely produce the results demanded by the market. When you see “Inclusionary Zoning” on the municipal docket, beware of what comes next. A housing policy based on sound economics will be messed up by bureaucratic intervention. Politicians will be quick to point out that they supported affordable housing when election time rolls around, yet their good intentions produce meager results.

It is a public benefit to have a housing market that is constantly moving toward equilibrium where supply and demand meet. This brings about fairness in value to the most people. Those that place roadblocks in the way of adding more shelter or interfere on behalf of the NIMBYs are enemies of the community’s productivity.

Highlighting Asymmetry

The Housing Tides Index is comprised of demand, supply and financial indicators which provide a holistic view of housing market conditions in cities across the U.S.

Two ways we assess housing demand are to 1) compare permits for new housing to employment growth and 2) compare permits to household formations.

A balanced market builds 0.5-1.0 homes per new job and one home per new household formed. In the table below we can see Housing Tides data for these indicators in the top twenty housing markets by permit volume. Note that metro areas that are failing to build sufficient housing to keep up with job and household growth tend to face the greatest affordability challenges.

housing demand and financial indicators used how to spot over-valued markets and under-valued markets
Housing demand and financial indicators for the top 20 U.S. markets.

Housing Tides Index score helps to spot over-valued markets and under-valued markets
Housing Tides Index™ measures and compares the health of U.S. housing markets with a single number.

Evaluate Opportunities with Housing Tides™

Study Housing Tides to see how your market stacks up. You can also look for new markets that welcome growth without the roadblocks. Housing Tides is all about finding opportunity in a turbulent environment.

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Jeff Whiton Housing Tides Research Team Member

About Jeff Whiton

Jeff formerly headed operations for Lennar and KB Home in Colorado building nearly two per cent of the state’s total single-family housing stock. He was honored as Colorado’s Home Builder of the Year in 2001. Whiton also served as the CEO of the Home Builders Association of Metro Denver for eight years reviving the association from near bankruptcy after the Great Recession.

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