As Reported to the Daily Real Estate News in Realtor Mag, Thursday February 5, 2015
Home prices between the top and bottom segments of the housing market
are rising, which could unleash a “domino effect” that builds
first-time and move-up buyer momentum this year, notes a new real estate
report by Clear Capital. But the build up in traditional home buyers is
coming at the cost of declines in the luxury home market.
"The rate of appreciation for top tier homes is stalling, which is a
more direct reflection of waning fair market demand,” says Alex
Villacorta, vice president of research and analytics at Clear Capital.
“While this is a concerning development, there is a silver lining. The
moderating upper tier may give traditional buyers a moment to catch
their breath, and entice move-up buyers to enter this segment of the
market. The ripple effect of opening up inventory all the way down the
price spectrum could provide opportunity and motivation across all
segments, including first-time buyers, to enter the marketplace.”
The lower and middle-range ends of the housing market is stabilizing,
allowing traditional home buyers to re-emerge. “The next phase of the
housing recovery is dependent on healthy demand from this segment,”
Villacorta says.
The lower-end of the housing market was once driven mostly by investor activity,
but now doors are opening for first-time home buyers to break in.
Also, as the number of underwater mortgages steadily decreases, home
owners in the mid-tier of the home pricing segment can finally trade up
to a larger, more expensive home.
Lower-end properties have been outpacing price growth in the luxury
market, Clear Capital reports. The low-tier has posted double-digit
gains year-over-year of 10.2 percent, compared to the top tier, which
saw the lowest price growth rate among the three tiers, at 3.6 percent
year-over-year.
“This divide between a healthy low tier and stalling top tier could
kick-off a domino effect,” Clear
Capital notes in its report. “Stalling
prices in the top tier of the market could create the perception of a
good deal. This instills confidence in mid-tier home owners, motivating
them to move-up to the top tier. In turn, this opens up more opportunity
for low tier home owners to move-up to the mid tier.
This domino
effect could be the catalyst for balanced demand across all sectors of
the market.”
The Midwest is leading the pack, according to Clear Capital. The
Midwest posted double-digit gains in the low-tier segment at 13.6
percent, while seeing its top-tier of the market fall 3.3 percent with
prices. The Midwest is the only region currently seeing price
appreciation in the low and mid tiers, growing above 1 percent.
As such, Clear Capital economists are predicting the Midwest to be
the first region in U.S. to realize full buyer momentum among first-time
and move-up buyers, due to its moderating top tier.
Source: “Clear Capital: Traditional Homebuyers, Make Your Move,” Clear Capital (Feb. 2, 2015)