An increasingly common phenomenon across the county is the schism in price growth between high end and low end properties. While recent discussions suggest that the market is generally normalizing, new data from Clear Capital’s Home Data Index™ (HDI) Market Report reveals that there are drastically different dynamics going on at the extremes of nearly all markets. In evaluating these extremes, the investment potential appears to be leaning towards the low price tier.
“As the housing recovery continues to unfold, we are clearly seeing a growing dichotomy between the low price tier and top price tier market performance,” says Alex Villacorta, Ph.D., vice president of research and analytics at Clear Capital. “By and large, the low price tiers of the Top and Bottom MSAs are significantly outperforming their top tier counterparts. For both first time home buyers and investors, this should signal a major opportunity in these lower tiers. For any buyers of high end properties this clear trend signals the need to be highly vigilant with investment strategies in this market segment.”
When looking at the price tier growth differences in conjunction with distressed saturation, MSAs with some of the highest distressed saturation rates like Detroit, Orlando, and Miami show low tier YoY growth outpacing that of the top tier by large margins, in some cases by more than 20 percent. This is most likely due to high levels of investor activity in the low price tiers, which also typically represent the majority of distressed activity. However, the top tiers of these markets appear to be lagging significantly in comparison.
The San Jose MSA was knocked off its top spot by the Detroit, MI MSA, where QoQ growth is an impressive 2.4 percent. Apart from Detroit, Mich., most markets appear to be slowing down for the slow fall and winter real estate seasons. In another shakeup, Las Vegas, Nev. QoQ growth fell from by 0.5 percent from 2.0 percent to 1.5 percent QoQ growth this month.
When looking at the price tier growth differences in conjunction with distressed saturation, MSAs with some of the highest distressed saturation rates like Detroit, Orlando, and Miami show low tier YoY growth outpacing that of the top tier by large margins, in some cases by more than 20 percent. This is most likely due to high levels of investor activity in the low price tiers, which also typically represent the majority of distressed activity. However, the top tiers of these markets appear to be lagging significantly in comparison.
For Detroit, overall QoQ growth is currently the highest in the nation at 2.4 percent, but there are some pretty significant differences between its high and low end properties. The Detroit low tier is showing an extremely impressive 4.2 percent QoQ growth, while its highest tier is growing at a much slower pace, only 0.8 percent QoQ.The story is the same in Miami, the top tier of the housing market is growing by an otherwise impressive 0.6 percent QoQ and 4.9 percent YoY; however, the lowest tier of the market appears to be sprinting ahead with 2.7 percent QoQ growth and 15.5 percent YoY growth. These kinds of disparities between the low and top tiers are obfuscated when looking at the growth figures for the entire market as a whole, and could lead to missed opportunities for investors who are only looking at the headlining figures, or worse, disappointing returns for those who are investing on higher end properties.
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