TRUCKEE, CA--(Marketwired - February 02, 2015) -
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Fifteen years into the new millennium, we are finally seeing real potential that the market can support full buyer momentum. 2015 has the promise of a transitional year where full buyer momentum in the low and mid tiers reinforces a strong housing recovery. Sustained national price growth in the low tier segment, once driven by investor activity, is good news for first-time homebuyers. Also encouraging, the number of potential move-up buyers locked into underwater mortgages has been steadily decreasing. The recent rise in home prices continues to bring more homeowners out of negative equity. With more equity to play with, mid tier homeowners could move-up, creating more opportunity and driving healthy demand in the low and mid tiers of the market.
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The top tier gives way, extending more opportunity to traditional buyers. While we are expecting price growth to moderate across all tiers in 2015, the top tier's quarterly growth rate fell to 0.3% in the fourth quarter, where it had been holding steady at around 1% through the first three quarters of 2014. Year-over-year, this tier experienced the lowest price growth rate of 3.6% among the three national tiers. At its current pace, continued moderation in the top tier could push quarterly price growth into negative territory in 2015. January data also reveals the low tier holding on to double digit gains year-over-year at 10.2% and healthy quarter-over-quarter gains of 1.5%. This divide between a healthy low tier and stalling top tier could kick-off a domino effect. Stalling prices in the top tier of the market could create the perception of a good deal. This instills confidence in mid tier homeowners, motivating them to move-up to the top tier. In turn, this opens up more opportunity for low tier homeowners to move-up to the mid tier. Creating new opportunity in the low tier could entice potential first-time homebuyers to enter the market. This domino effect could be the catalyst for balanced demand across all sectors of the market.
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Regionally, the Midwest continues to lead the pack. Year-over-year the Midwest held on to double digit gains in the low tier segment at 13.6%, while the top tier fell to 3.3%. We also observe this gap between growth in the low and top tiers on a quarterly basis, with the low tier growing at 1.7% and relatively flat growth in the top tier at 0.5%. The Midwest led the nation in the all tier segment, with quarter-over-quarter growth at 0.9%, narrowly edging the West at 0.7%. The Midwest is the only region currently seeing price appreciation in the low and mid tiers, growing concurrently above 1%. A moderating top tier could incentivize mid tier homeowners in 2015 to move-up, setting up the Midwest to be the first region to realize full buyer momentum across all segments.
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Contact Alanna Harter for your January 2015 file of the Top 30 MSAs or to access our data on the Bloomberg Professional service by typing CLCA <GO>.