Jim Morrison – Boston.com correspondent

May 5, 2022 12:49 p.m

After two years of pandemic-driven growth, the Boston-area housing market is “overvalued,” according to a report by global real estate information firm CoreLogic released on Tuesday.

Selma Hepp, the company’s chief economist, said that when home prices grow 10 percent faster than local incomes over a period of time, they think the market is overvalued. In March, home prices grew 11 percent faster than local incomes, pushing Boston just over the edge.

To put it in context, in the summer of 1987, before a major housing correction, house prices rose 144 percent faster than wages, she said. Boston hasn’t been significantly overvalued since the run-up to the 2007 mortgage crisis.

“Remember, mortgage rates didn’t really go up until mid-March,” Hepp said, “so we could see more of that in slower housing market conditions over the next month or two.” That 11 percent difference could go down a bit.”

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CoreLogic also publishes the Market Risk Indicator, which measures local housing supply, population growth, number of houses still flooded, mortgage arrears, etc. That report gave Boston a 46 percent chance of a price decline over the next 12 months. But Hepp said she’s not too worried about that either.

“While these higher prices and mortgage rates exclude some people, the demand for housing is so great relative to the supply that there are still many people who can and will buy,” she said.

Melvin A. Vieira Jr., president of the Greater Boston Real Estate Board, said he sees signs the market is hitting the brakes and that home prices have become less aggressive since March. He said this will impact the lower end of the market first.

“We’re going to have fewer bidding wars on properties under $1 million,” he said. “You’re really going to see price alignment and even price adjustments. We won’t see as many multiple offers for homes in this price range.”

Guaranteed Rate’s Shant Banosian, who had $2.2 billion in funded loans as of 2021, said he wasn’t worried about the Boston market.

“Most clients I speak to aren’t maxing out their income,” Banosian said. “I’m still looking for people with fairly good credit, a low debt-to-income ratio, and some cash left over after the deal closes. When I do business in Southern California, people often overwhelm themselves. It’s much cheaper here. I don’t see many people pulling out of the market because prices have gotten too high.”

Larry Rideout, chairman and founder of Gibson Sotheby’s International Real Estate, said the report was interesting but not surprising. Interest rates, house prices, and inventories all change in the Boston market, and he closely monitors which changes become trends.

“Following the meteoric rise in prices in recent years, the world needs to find some balance,” Rideout said. “Prices cannot go up by ten to fifteen percent a year forever. It all comes down to inventory, and everyone keeps an eye on inventory.”

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