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US Real Estate 25% To 60% Overvalued, Analyst Says


US real estate is looking like a bubble, housing analyst Mark Hanson says. Propped up by "unorthodox capital," US properties are between 25% and 60% overvalued.

Market value should come from the average homebuyers down-paying 20% while taking on a 43% debt-to-income ratiobut the math just isn't adding up, Hanson says.

In the Bay Area, for instance, Mark’s math would put the average home at $778k, about half the real average of $1.45M, Fortune reports.

The “prop-up” cash comes from institutional investors buying up homes as landlords, plus foreign buyers parking money in America’s “safe haven” real estate market, a trend likely to continue with the recent EB-5 extension.

Mark says there’s no way to know when prices will drop to their real value, but when part of the prop-up cash leaves—like Chinese investors strapped for cash from their domestic troubles—the rest of that “unorthodox capital” is bound to flee. [Fortune]