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all Street is sounding the alarm on US home prices, warning that they are 35 percent higher than their actual value. Green Street Advisors analyzed two publicly traded companies, Invitation Homes and American Homes 4 Rent, which own over 137,000 single-family homes nationwide. The firms' stock performance suggests investors believe these homes are overpriced.

    Invitation Homes' average home price is $415,000 in metro areas where it owns properties, but its share price implies a value of around $310,000. This significant discount has grown by 10 percentage points since the Federal Reserve raised interest rates in 2022 to combat inflation. Green Street believes this disconnect between public and private markets could lead to a major housing correction.

    A similar scenario played out with office companies before the COVID-19 pandemic, where investors priced in future upheaval as jobs shifted to remote work. Steelcase Inc.'s stock plummeted by over 44 percent from January to March 2020. Green Street's John Pawlowski warns that share prices of big landlord companies are a key indicator for the housing market.

    The gap between public and private markets in single-family homes can persist longer than in commercial real estate, as home prices are set by individual sellers rather than investors. Currently, Wall Street landlords are being cautious about expanding their portfolios, with institutional investors responsible for just 0.3 percent of US home purchases in the third quarter of 2024.

    Big investors are struggling to make profits due to elevated mortgage rates, even as the Fed lowers the federal funds rate. Some are circumventing this issue by building homes themselves or buying newly constructed units directly from builders at a discount. If these large investors are hesitant to buy homes, it suggests that ordinary people may be overpaying significantly.