Based on ratios of home prices, incomes and rents, San Francisco, San Jose and Oakland all made Trulia’s latest top-ten list of the most “overvalued” housing markets in the U.S., ranking fourth, seventh and tenth respectively.
While Austin, Texas topped Trulia’s list of the most overvalued metro areas with home prices 19 percent overvalued relative to incomes and rents, San Francisco wasn’t too far behind at 12 percent higher than Trulia suggests the fundamentals alone should support.
That’s an increase of 6 percentage points for both Austin and San Francisco over the past quarter, second only to West Palm Beach, Florida with an 8 point gain, and versus an average 1 percentage point drop over the past quarter for the largest 100 metro areas in the U.S.
Deemed 4 percent overvalued in the third quarter of 2013, Trulia’s measure of San Francisco’s overvaluation has increased 8 percentage points over the past year while Trulia’s measure of asking prices for homes in the area has increased a little over 11 percent over the same period of time.
And in the words of Trulia:
“One test of whether it’s time to sound the bubble alarm is whether prices are rising faster in markets that are already overvalued. Price gains in overvalued markets are a sign that we’re headed for danger, while price gains in undervalued markets are probably just a sign of getting back toward normal.”
Trulia deems the San Jose housing market to be 10 percent overvalued, up from 5 percent in the third quarter of 2013 but down from 11 percent in the second quarter of 2014, while home prices in Oakland are currently 7 percent overvalued according to Trulia, down from 10 percent last quarter and unchanged year-over-year.