Homes in the Houston-The Woodlands-Sugar Land metro are roughly 20 percent overvalued, giving them a one in three (36 percent) chance of seeing price deprecation in the next few years, according to a recent ranking put out by Arch MI. The report dubbed Houston as the only top 50 metro nationally to be at “elevated risk” of home price declines.

  • Houston's oil and commercial construction sectors of concern to Arch MI.
  • Two sources believe Houston homes are roughly 20 percent overvalued.
  • Five Texas metros where ranked as having a more than 25 percent chance of home price declines in the coming years.

Houston home prices are on the rise, but are they too high?

Homes in the Houston-The Woodlands-Sugar Land metro are roughly 20 percent overvalued, giving them a one in three (36 percent) chance of seeing price deprecation in the next few years, according to a recent ranking put out by Arch MI. The report dubbed Houston as the only top 50 metro nationally to be at “elevated risk” of home price declines.

“It’s not gloom and doom,” said Ralph DeFranco, senior economist at Arch MI. “Just flagging it (Houston) as having a potential issue.”

DeFranco pointed to volatility within the oil sector, along with Houston’s commercial construction sector, as factors that will affect home prices moving forward.

Currently there is a significant volume of office construction ongoing in the metro, which DeFranco doesn’t expect to continue once projects underway reach completion. This would suggest employment in the metro’s construction industry could fluctuate negatively.

Inflated Houston home prices a common theme

Arch MI isn’t the only source that believes home prices in Houston are 20 percent above their long-term fundamental value. CoreLogic also feels this way, with the firm forecasting home values to be “largely flat through September 2016,” in the metro.

Home prices in Houston recently took a dip for the first time since February. According to the Houston Association of Realtors, the market’s average sales price dropped by 3.5 percent year-over-year in November to $262,064.

Of note, Arch MI pointed to the Austin, Dallas, Fort Worth and San Antonio metros all having a 26 percent chance of home price declines in the coming years.

Email Erik Pisor

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