As the CEO of Reventure Consulting I developed a model that predicts the true fundamental value of houses in the 2022 Housing Market. This model can help identify cities where a Housing Crash will take place.
It has 3 Key Inputs:
1) Price / Earnings Ratio: the ratio of Home Prices compared to Worker Wages in the economy. If prices get too high and workers can’t afford the down payments and mortgage payments, there could be a Housing Crash.
2) Price / Rent Ratio: the more than home prices go above rent, the more likely the households will forgo buying for renting. And that investors will drop out of the market due to low yields.
3) Long-Term Trend: evaluating home price growth over 25 Years in a metro to see if the current values deviate significantly upward from trend (aka a Housing Bubble).
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10. Atlanta, GA – Atlanta’s Real Estate Market has as much as 25% price downside given how expensive home values have become for local workers.
9. Cape Coral, FL – One of the most volatile Housing Markets in America. Cape Coral/Fort Myers is currently in a Housing Bubble but could have another 2007-style Crash given how high prices are relative to rents and long-term trends.
8. Phoenix, AZ – Home Prices in Phoenix today are 50% higher than the previous peak in 2007. Meanwhile, inventory is surging and real estate investors are starting to sell out of the market.
7. Tampa, FL – the home-flipping capital of the US. Tampa has a ton of investor demand that pushes home prices up during Housing Booms and down during Housing Crashes.
6. Charlotte, NC – Charlotte has quickly become one of the America’s biggest Housing Bubbles. A sky-high Price to Rent Ratio indicates that both homebuyers and investors will stop buying.
5. Raleigh, NC – Home Values in Raleigh are nearly 35% high than the long-term trend. Which is problematic for a city where migration is below the previous highs experienced in the mid-2000s.
4. Seattle, WA – Seattle lost the most people it ever has in 2021 according to US Census Bureau data. Now Housing Inventory is climbing rapidly and prices are projected to decline 28%.
3. Salt Lake City, UT – a combination of record-high prices, stagnating wages, and too much home building make Salt Lake City one of America’s biggest Housing Bubbles.
2. Boise, ID – this will be one of the first cities to Crash. Inventory in Boise is up 118% YoY according to Realtor.com and Zillow estimates show values already declining.
1. Austin, TX – America’s Biggest Housing Bubble is without a doubt Austin, TX. Home Values are predicted to Crash by 34% according to the Reventure Consulting Home Price Model.
Zillow Data: https://www.zillow.com/research/data/
BLS Data: https://www.bls.gov/sae/data/
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