“National prices are 15% overvalued in real terms,” Fitch says in the report. “The risk is most pronounced in markets that have seen very high home price growth in recent years that has outpaced improvements in local housing and economic fundamentals.”
California is one of these markets, according to Fitch. It cites as an example San Francisco, noting that price-to-rent ratios in this market have jumped almost 25% since early 2012, “and are approaching all-time highs.”
Property appreciation is “topping out,” Veros recently warned in a forecast last week.
“Most of the US will see continued home price growth reflecting market momentum, the effects of inflation, the improving economy, and a return of buyers attracted by signs of stabilization,” Fitch says. “However, gains are expected to slow compared to prior years due to rising mortgage rates and more inventory becoming available.”