81% of America's housing markets were overvalued at the start of 2026, ratings agency says

National home prices were 10.3% overvalued at the start of the year, Fitch says. The most overvalued market was Newark, N.J.

As home prices reach new highs, most housing markets in America are overvalued, and the Northeast is leading the pack.

As of the first quarter of 2026, home prices were overvalued in 81% of American metro areas, Fitch Ratings said in a recent report, with 48% of them overvalued by more than 10%.

National home prices were 10.3% overvalued in the first part of the year, the agency added. Fitch calculated overvaluation based on the extent to which actual home prices exceeded long-term home-valuation trends.

Home prices have remained near all-time highs, even as high mortgage rates have weighed down home-buying demand. With mortgage rates in the 6% to 7% range over the past few years, buyers have retreated. But low inventory helped propel home prices to record highs over the summer. In June, the median price for an existing home reached $440,600, the highest since NAR began tracking the figure in 1999.

The housing supply has improved, but rising mortgage rates are now a roadblock for prospective buyers. In August, the total number of homes for sale hit a nearly seven-year high, NAR said.

In mid-September, the 30-year mortgage rate exceeded 7%. High borrowing costs are expected to dampen home-buying demand further, as people may find their monthly mortgage payments too expensive to afford, particularly as other housing costs, such as homeowners-insurance premiums, increase.

Fitch said that the U.S. housing market has "shifted from stagnation to contraction" due to weak housing demand even relative to post-pandemic levels.

"Elevated mortgage rates, softening labor market conditions, tariff-driven construction-cost pressures, higher energy prices and persistent geopolitical uncertainty are collectively weighing on housing activity - spanning construction, sales, affordability and mortgage performance," the ratings agency said.

"Geopolitical tensions have further amplified volatility in energy markets and inflation expectations, adding pressure to both housing-related costs and household budgets," Fitch added.

Related: Home-insurance premiums just hit a record high. Here's where they spiked the most.

These are the top 10 markets where home prices are most overvalued, according to estimations by Fitch:

 
Metro area                                               Fitch's estimated overvaluation (%) 
Newark, N.J. (division)                                  20%-24% 
Philadelphia-Camden-Wilmington, Pa.-N.J.-Del.-Md.        20%-24% 
Chicago-Naperville-Elgin, Il.-Ind.                       15%-19% 
Indianapolis-Carmel-Greenwood, Ind.                      15%-19% 
New York-Newark-Jersey City, N.Y.-N.J.                   15%-19% 
Columbus, Ohio                                           15%-19% 
Austin-Round Rock-San Marcos, Texas                      15%-19% 
Chicago-Naperville-Schaumburg, Il. (division)            15%-19% 
New York-Jersey City-White Plains, N.Y.-N.J. (division)  15%-19% 
Washington-Arlington-Alexandria, D.C.-Va.-Md.-W.V.       15%-19% 

Fitch's rankings include both the larger metropolitan statistical areas, as well as metropolitan divisions, which are subdivisions of larger metro areas.

For instance, New York-Newark-Jersey City, N.Y.-N.J., refers to the large, overarching metro area. This includes all of New York City, parts of Long Island, as well as parts of northern and even central New Jersey.

The smaller Newark, N.J., metropolitan division is a grouping within the larger metro area. Major cities in the Newark division include Elizabeth, Morristown, Montclair, Newark, as well as smaller commuter towns such as Short Hills and Glen Ridge.

The New York-Jersey City-White Plains division similarly is another grouping within the larger metro area. Counties in this category include the five boroughs of New York, as well as Westchester, Rockland and Putnam counties.

Fitch also ranked all 50 U.S. states in terms of which are most overvalued. These are the top 10:

-- Maine

-- New Jersey

-- Tennessee

-- Utah

-- Montana

-- Alabama

-- Wisconsin

-- Idaho

-- Delaware

-- New hampshire

Fitch expects home-price growth to be "largely" flat this year, as mortgage rates stay high and suppress affordability for prospective home buyers.

In mid-September, 42% of home listings had a price cut, according to ParclHQ, a real-estate analytics platform. The median markdown was about 5.1%.