It's a one-two punch for residential real estate in Texas: San Antonio and Austin are the two most overvalued home markets among the country's 50 largest metro areas.
Forbes makes that declaration based on data crunched by Fitch Ratings, a credit-rating agency. Looking at data for the first quarter of 2016 and the first quarter of 2017, Fitch weighed year-to-year changes in five factors: nominal income growth, population growth, unemployment, change in rental prices, and change in home prices.
Based on those calculations, Forbes reports San Antonio is the most overvalued home market in the U.S. at 18.6 percent. No. 2 is Austin, where the home market is overvalued by 17 percent. Last year, San Antonio and Austin tied for first place on the list; they were overvalued by 19 percent.
In presenting the list of the five most overvalued home markets, Forbes says homebuyers need not avoid these markets altogether, "but they should proceed with care."
"While Fitch contends that markets tend to return to fair value eventually, they don't predict when," Forbes says.
Despite the rankings, leaders of the Realtor groups in San Antonio and Austin maintain their home markets remain healthy and attractive.
"While home prices have risen in recent years in the San Antonio area, our prices still remain lower than those in other major Texas cities and the nation," Angela Shields, president and CEO of the San Antonio Board of Realtors, says in a statement provided to CultureMap.
She adds: "San Antonio has benefited from a growing population and jobs relocating here, which has resulted in an increase in income levels. This, combined with higher quality homes being built and a growing demand for housing, means home prices in some areas have risen. The good news for buyers, though, is with interest rates remaining low, they are still able to make their money go further."
Brandy Guthrie, president of the Austin Board of Realtors, says overvalued home markets are "driven by speculation."
"Prices rise, not because demand for housing is increasing, but because buyers believe prices will continue to rise in the near future, increasing the value of their investment and presenting the potential to flip properties quickly. That type of speculation is not what is driving housing demand in Austin," Guthrie tells CultureMap in a statement.
"In Austin today," she adds, "housing demand is being driven by unprecedented population growth and continued job growth. Those factors mean more people want to live in and around Austin and are buying homes here. That's true housing demand, not speculation."