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Florida and Texas Housing Markets Starting to Look Like 2007

Posted by Sami Thalji | May 25, 2022

The big question on everyone's mind regarding the housing market is whether or not we are in another bubble? While the general consensus seems to be that we will not experience a significant downturn in the housing markets anytime soon there are some disturbing trends developing that suggest otherwise. Home prices are up more than 34% over the past 2 years with a 20% increase in home prices this year alone. That is more than 4-5 times historic averages.

The prices increases have completely detached the value of a home from what are considered market fundamentals, such as household income. While we are being told that the conditions surrounding the market are different than they were in 2006, such as banks lending to better credit risk borrowers, higher employment rates, etc., it seems we would be fools to believe what we're being told since no one told us that the market would collapse last time.

A recent study from Florida Atlantic University found that every one of the top 100 housing markets in America are overpriced relative to household income earned in those areas. An overwhelming half of the top 100 housing markets are at least 30% overvalued, with another 13% of the market overvalued by more than 50%. That means 66% of the top 100 housing markets are significantly overvalued.  To make matters worse, a recent report by Moody's claims that at least 96% of the nationwide housing market is significantly overvalued.

Some of the most overpriced markets include are Austin, Texas (66% overvalued); Dallas/Ft. Worth, Texas (50% overvalued); San Antonio, Texas (31% overvalued); Ft. Myers, Florida (56% overvalued); Lakeland, Florida (53% overvalued); Melbourne, Florida (47% overvalued); Jacksonville, Florida (42% overvalued); Miami-Ft. Lauderdale, Florida (30% overvalued); Bradenton-Sarasota, Florida (50% overvalued); Orlando, Florida (43% overvalued); Tampa, FL (52% overvalued);  

One of the reasons these markets have been so overvalued is due to Covid-19 fallout. With more employees working from home, buyers have flooded these markets leading to increased demand with very little supply. If the economy goes into recession and employers force workers to go back into the office to work it may shatter these housing markets and leave these markets susceptible to significant price corrections.

Experts are still predicting small declines in housing prices over the next year, most see a 5-10% price decrease on the horizon, which is a far cry from the 2008 housing crisis. They may be right, but at what point does a price decrease trigger a significant increase in foreclosures? The problem is that in 2020 less than 10% of all housing markets were overvalued. Now that number is 96%. That is an incredibly fast increase. What happens if the rate of decrease comes just as fast? The only point of comparison we have in recent history is the last housing collapse which triggered a record amount of foreclosures. In 2007, leading up to the housing crash 99% of all housing markets were overvalued, compared with 96% today. 40% of those markets were overvalued by 30% and 19% by at least 50%. The numbers are similar to what we see today. The biggest difference between than and now is that Florida, California, and New York combined to form the most overvalued housing markets. This time around only Florida has a heavily concentrated amount of overvalued housing markets. One reason being that many people are leaving New York and California and moving to Florida, again fueling Florida's overheated housing market.

Nobody knows what will happen, but I find it hard to believe that there will not be a significant wave of foreclosures in the future in Florida as prices begin to drop. Over the last two years the majority of buyers have overpaid for their homes. At what point of the price drop do foreclosures start increasing? By the time we figure out the answer to that question it will probably be too late.

About the Author

Sami Thalji

Sami Thalji is a native Floridian, born in Clearwater and raised in St. Petersburg, Florida. Sami graduated from Osceola High School in Seminole, Florida before attending and receiving both his Bachelor of Science and Juris Doctor from the University of Florida in Ga...


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