The Best and Worst Cities to Buy a House
Homes in New Orleans are trading at a 5% discount while South Florida homes are overvalued by 36%.
At a time when many Americans are struggling to find homes to purchase, one housing market has emerged as offering the best deal for buyers based on historic trends. That market is New Orleans, Louisiana. This conclusion is based on housing premium/discount and price-to-rent ratios, according to data from Florida Atlantic University College of Business.
The Top 100 U.S. Housing Markets and the BH&J National Price-to-Rent Report are two monthly reports that help determine best housing markets. The Top 100 U.S. Housing Markets Report looks at factors such as the actual average home price in a city and the long-term pricing trends and calculates how overvalued or undervalued housing markets are. The National Price-to-Rent Report determines whether renting or ownership is preferable in a market, based on a price-to-rent ratio.
Currently, housing prices in New Orleans are selling at 5.09% below that area’s long-term pricing trend. The average home price in New Orleans is $235,105 currently. However, based on statistical estimates, the average home price should be $247,721. This suggests today’s pricing gives buyers a nice discount.
In addition, the price-to-rent ratio in New Orleans is 12.53% below average, too. This information suggests buying is preferable to renting in that area.
According to Ken H. Johnson, real estate economist with Florida Atlantic University’s College of Business, being able to purchase a home in New Orleans at a discount relative to the area’s long-term pricing trend suggests it is the best buy among the nation’s largest metro areas.
In stark contrast, however, the Miami metro area is an area of concern for the average homebuyer, according to researchers.
“Miami is the only place in the country where not only have home prices not gone down as most cities have witnessed recently, but also the price-to-rent ratio is the highest it has been in almost nine years,” according to researcher Eli Beracha, Ph.D., director of FIU’s Hollo School of Real Estate.
At the current time, the typical home in South Florida is approximately 36% overvalued. In addition, its price-to-rent ratio is currently at a 7.81% premium.
“While I do not think we will have a crash like we did 16 years ago, this is not a good sign,” Johnson said, referring to the South Florida market.