According to a recent report from Fitch Ratings, home prices in 81% of U.S. metropolitan areas were considered overvalued at the beginning of 2026. The ratings agency noted that nearly half of these markets—48%—had prices exceeding long-term valuation trends by more than 10%, while national home prices overall were 10.3% overvalued.
The analysis, released on September 2, measured overvaluation by comparing current actual prices against historical long-term trends. Despite mortgage rates hovering between 6% and 7% for the past few years, which has significantly dampened buyer demand, home prices have remained stubbornly close to all-time highs. This persistence is largely attributed to chronic low inventory, which pushed the median price of an existing single-family home to $440,600 in June, the highest level recorded since the National Association of Realtors began tracking the figure in 1999.
Although the housing supply has seen some improvement, with the total number of homes for sale reaching a seven-year high in August, borrowing costs continue to pose a major barrier. By mid-September, the average rate on a 30-year mortgage had climbed above 7%. Fitch warned that these elevated rates, combined with rising homeowners insurance premiums, are making monthly payments increasingly unaffordable for many prospective buyers.
The agency described the current state of the U.S. housing market as having “shifted from stagnation to contraction.” In its assessment, Fitch highlighted that softening labor market conditions, tariff-induced construction cost pressures, higher energy prices, and ongoing geopolitical uncertainty are collectively weighing on all aspects of housing activity, including construction, sales, and mortgage performance.
Fitch identified the following metropolitan areas as having the most severely overvalued home prices:
- Newark, New Jersey (division): 20%-24%
- Philadelphia-Camden-Wilmington, Pennsylvania-New Jersey-Delaware-Maryland: 20%-24%
- Chicago-Naperville-Elgin, Illinois-Indiana: 15%-19%
- Indianapolis-Carmel-Greenwood, Indiana: 15%-19%
- New York-Newark-Jersey City, New York-New Jersey: 15%-19%
- Columbus, Ohio: 15%-19%
- Austin-Round Rock-San Marcos, Texas: 15%-19%
- Chicago-Naperville-Schaumburg, Illinois (division): 15%-19%
- New York-Jersey City-White Plains, New York-New Jersey (division): 15%-19%
- Washington-Arlington-Alexandria, District of Columbia-Virginia-Maryland-West Virginia: 15%-19%
The report distinguishes between larger metropolitan statistical areas and their smaller subdivisions. For instance, the New York-Newark-Jersey City metro area encompasses the five boroughs, Long Island, and parts of New Jersey, while the Newark division includes cities such as Elizabeth, Morristown, and Montclair.
On a state level, Fitch ranked Maine, New Jersey, Tennessee, Utah, Montana, Alabama, Wisconsin, Idaho, Delaware, and New Hampshire as the most overvalued. Looking ahead, the agency expects home-price growth to remain largely flat throughout the year as high mortgage rates continue to suppress affordability. Reflecting this shift in market dynamics, data from real estate analytics platform ParclHQ indicated that by mid-September, 42% of home listings featured a price reduction, with the median markdown sitting at approximately 5.1%.
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