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More housing markets are overvalued, and consumers feel the pain

168199409JM009_New_Housing_The steady rise in home prices is so far showing no boundaries, and that is turning up the heat on some already overheated housing markets.

Home prices rose 7 percent nationally in September, compared with September 2016, a higher annual increase than was seen in August, according to CoreLogic, a real estate data firm.

As a result, 48 percent of the nation's top 50 housing markets are now considered "overvalued," up from 46 percent in August. A market is considered overvalued when home prices are at least 10 percent higher than the long-term, sustainable level. For the top 100 markets, 36 percent were considered overvalued.
"A strengthening economy, healthy consumer balance sheets and low mortgage interest rates are supporting the continued strong demand for residential real estate," said Frank Martell, president and CEO of CoreLogic, in a statement.

"While demand and home price growth is in a sweet spot, a third of metropolitan markets are overvalued and this will become more of an issue if prices continue to rise next year as we anticipate," he said.

Las Vegas, Denver, Los Angeles, Miami and the New York-New Jersey metropolitan area are all considered overvalued.

By comparison, these pricey markets, Boston, San Francisco and Chicago, are considered at-value, based on long-term price sustainability. San Francisco is one of the most expensive markets in the nation, but higher incomes can support it.

High housing demand and low supply are continuing to fuel prices. Both are weighing on consumer sentiment. After matching an all-time high in September, homebuyer and seller sentiment dipped in October, according to a monthly index from Fannie Mae.