If your home is ‘overvalued’ – and many are in Florida – you may be paying too much insurance

Are you possibly over-insuring your home? What about knowing the “actual” value of your property before you buy or sell?

Researchers at Florida Atlantic University, in partnership with those at Florida International University, have been analyzing the real estate market since 1996, and each month, FAU’s College of Business releases a Top 100 list of the “most overvalued” metro areas for properties that include single-family homes, townhomes, condos and co-ops.

In the recently released rankings, nine of the top 15 “overvalued” metro areas are in Florida, including the Miami metro area, which comes in at No. 11.

Economists at the universities agree that the beginning stages of moderation in housing prices are taking place. Yet, markets throughout the country remain significantly overvalued compared to long-term pricing trends.

“Prices are still moderating in the majority of the country, especially east of the Mississippi,” noted Ken H. Johnson, Ph.D., real estate economist at FAU’s College of Business.

According to the June data, Jacksonville and Phoenix saw slight price declines of .03%.

“It’s a sign that it could be years before prices return to where they should be, and buyers are no longer paying a premium for a home,” the report indicated.

Atlanta remains the most overvalued market in the country, with buyers paying more than a 47% premium. The next highest is Detroit, where homes are 46.08% overvalued, and Tampa, which comes in at 42.56% overvalued.

In Miami, an area showing little sign of a decline, homes are 38.89% overvalued.

But it wasn’t always that way. Not even close.

Here is a closer, four-year comparison of the Miami metro area’s average home price based on the Zillow Home Value Index (ZHVI scale), which reflects the typical value for homes in the 35th to 65th percentile range and the “expected” price:

June 30, 2023: Average home price was $458,749; expected price, $330,285; 38.89% overvalued.

June 30, 2022: Average home price was $433,280; expected price, $317,325; 36.54% overvalued.

June 30, 2021: Average home price was $342,888; expected price $304.873; 12.47% overvalued.

June 30, 2020: Average home price was $299,600; expected price, $292.910; 2.28% overvalued.

So, what’s the bottom line?

“There’s some concern in buying if you are looking to resell in a short time,” said Eli Beracha, Ph.D. of FIU’s Hollo School of Real Estate. “But, if you are planning on staying in the home for several years, purchasing should perform as well in terms of wealth creation as renting and re-investing.”

“For example, in Miami, there’s no reason to suspect a crash in prices as witnessed 15 years ago, when the average property lost upwards of 60% in its value. Supply and demand are completely different this time around.”

The ranking is part of FAU’s Real Estate Initiative, a collaboration of professors at FAU, FIU, Florida Gulf Coast University, and the University of Alabama to help the average consumer make informed decisions about housing. The initiative releases three monthly indices looking at rent prices, housing prices, and whether market conditions favor buying or renting.

The Beracha and Johnson Housing Market Ranking features the Top 100 “overvalued” list. Here are the Top 15 overall overvalued markets (with premium/discount):

1. Atlanta. 47.34%

2. Detroit. 46.08%

3. Tampa. 42.56%

4. North Port. 41.93%

5. Memphis. 41.85%

6. Winston-Salem, NC. 41.77%

7, Cape Coral. 41.66%

8. Charlotte, NC. 41.48%

9. Lakeland. 40.26%

10. Palm Bay. 39.89%

11. Miami. 38.89%

12. Jacksonville. 38.37%