5 Overhyped Luxury Housing Markets the Rich Should Avoid in 2024

No matter how much money you have, the idea of a property or entire market being overvalued can make you cringe if you’re buying real estate. No one wants to pay more for a place than it’s really worth.

According to Fitch Ratings, home prices in 90% of metro areas in the United States are overvalued. More than half of those are overvalued by more than 10%.

Several factors are playing into the inflated prices, but one big consideration is that demand is high and supplies are limited.

Here’s a look at five overvalued and overhyped luxury housing markets that even the rich might want to avoid for now.

You probably expect overvalued housing markets in Hawaii. The state is popular and expensive. According to U.S. News & World Report, Kahului is among the country’s most overvalued compared with local per capita incomes. 

This market, which includes the inhabited islands of Maui, Lanai and most of Molokai, has been hit by a chronic housing shortage fueled by an influx of wealthy retirees and vacation-home buyers. The problem here has become so bad that the governor has been working to create more affordable options for native and local-born residents, U.S. News reported.

If you’re considering moving to the San Francisco area, one of the most expensive in the country, you should also know it’s among the most overvalued as well.

This market has seen prices significantly increase due to higher demand and lower supply. In April, 17 homes sold for over $5 million, according to the San Francisco Real Estate June 2024 Report by Compass. That was the highest number since May 2022. The Cow Hollow neighborhood had the highest median sale price — $6.65 million.

The home of the big race and Hoosier hospitality is also one of the most overvalued luxury housing markets in the country. It comes as Indiana has seen growth with more families, young adults and entrepreneurs looking at the Hoosier State.

One thing to keep in mind is that the Indianapolis market includes such high-price areas as Carmel, where the typical home price is over $556,000, according to Zillow. If you want luxury housing that’s maybe less overhyped, try nearby markets such as Greater Lafayette or Fort Wayne.

If you’re looking at a market with overvalued homes, check out Seattle. According to U.S. News & World Report, it’s one of the most overvalued in the U.S. That’s thanks to higher-than-average payment-to-income ratios.

“The most overvalued markets to purchase a home tend to be located in California, but also include popular vacation home markets in Hawaii, tech-centered Seattle, Washington and pandemic-era ‘Zoomtowns’ including Greeley, Colorado, and Boise, Idaho,” according to U.S. News. 

This is one of those pandemic-era “Zoomtowns” where the luxury housing market is now overvalued and overhyped. In addition, it’s the only market in Idaho to make the list from U.S. News.

If you’re looking at Idaho for your next move, there are lots of great reasons it has become popular, but low cost of living isn’t among them. You’ll pay 5% above the national average and 12% more than the state average on living expenses, according to RentCafe.