Is it “the best of times and the worst of times” for price growth in real estate in some U.S. cities?
Peeling back the excitement over appreciating home prices, data provider Clear Capital released a report designed to parse the voluminous information available on real estate price appreciation into meaningful, hyperlocal wisdom.
In the newly minted Home Data Index (HDI) Market Report, Clear Capital reports what it calls “an increasingly common phenomenon” across the US: “the schism in price growth between high-end and low- end properties.”
Nearly all markets, they say, are experiencing the same type of extremes, although prices are beginning to return to expected levels. When taking a closer look, the low price tier is where the best investment potential lies.
Aside from investment potential, Clear Capital says, this improved potential for homes at lower prices may help lure first-time homebuyers into the market.
Miami is one of the markets to which the report pays special attention.
Miami, Detroit and Orlando reign as MSAs with the highest distressed saturation rates in the country. All three of these metros are also the most stark examples of how the low tiers of real estate are performing far better than higher priced market segments.
In fact, Miami shows the biggest difference in the haves and the have-nots in housing. The top tier grew by a healthy 0.6 percent quarter-over-quarter, and just shy of 5 percent year-over-year. However, the lowest tier of the market showed much stronger 2.7 percent quarter-over-quarter growth and whopping 15.5 percent growth from last year at this time to now.
The report attributes this to high levels of investor activity in the low price tiers, which usually translates into investors scooping up properties in distress. Although much of the country has recovered significantly from the market crash, there are still pockets of distress that skew overall results in an MSA.
The analysts also say that when the figures are lumped together to calculate a single data point about overall growth in a market, the nuances between market tiers are lost. Investors who seek to see significant yields in just focusing on the top tier of any market may be disappointed when those big-ticket properties don’t bring in big cash.
“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. 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,” said Alex Villacorta, Ph.D., vice president of research and analytics at Clear Capital, in a prepared statement.
“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.” – Alex Villacorta, Ph.D., vice president of research and analytics at Clear Capital
“For any buyers of high-end properties, this clear trend signals the need to be highly vigilant with investment strategies in this market segment.”
Clear Capital is a provider of real estate valuations, data, analytics and technology solutions to mortgage lenders, servicers, investors, the GSEs, and Ratings Agencies. Their team includes a nationwide network of more than 40,000 appraisers, real estate brokers and agents, and valuation experts and technologists.