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Home >> Daily Dose >> Index Reveals Mid-Tier Home Price Points Well Below 2006 Peak
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Index Reveals Mid-Tier Home Price Points Well Below 2006 Peak

priceAlthough the housing market appears to be 'normalizing' for the first half of 2015, middle tier home price appreciation is still lagging far behind its 2006 peak level, according to Clear Capital's Home Data Index (HDI) Market Report with data through July 2015. Additionally, the low-and top-tier have shown improvement, but are still below their 2006 peaks.

“Through the first half of 2015, we observed a housing recovery that is normalizing after an impressive price surge from the trough of the market,” said Alex Villacorta, Ph.D., VP of research and analytics at Clear Capital. “After more than two years of a pretty remarkable upward swing, the housing market’s correction-to-the-correction has given way to more normal rates of growth. What we now know, however, is that this correctionary period has not treated all markets, nor segments within markets, the same."

The Clear Capital HDI measures market appreciation rates across the lowest (up to 25 percent), middle (26 percent-75 percent), and highest (76 percent and above) priced homes in an area to dissect valuation risk.

According to the data, the low-tier is closest to peak 2006 levels, with prices only 10.1 percent below 2006 peak levels. On the other hand, the mid-tier, which includes homes selling between $120,000 and $345,000 stands as the worst performing segment with  price levels 24.8 percent below 2006 peak levels.

“In particular, our latest data exposed a mid-tier lag," Villacorta said. "This segment is still way behind both the top and bottom of the market in terms of recovery over the last nine years. When we analyzed the change in home prices since the summer of 2006, we observed that the mid-tier has lagged behind both the upper end and lower ends of the market by a surprisingly wide margin."

"This vast difference in market recovery underscores the continued challenges the majority of homeowners face, despite a quicker recovery in both the bottom and top segments of the market," the report stated.

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"The low-tier was both hit and buffered by high levels of distressed activity which, in recent years, has sparked investor activity driven in large part by the accelerated demand in the rental sector," Villacorta noted. "And, the top-tier has benefited from a segment of the market that is more resilient to the current economic climate. The mid-tier’s performance is concerning as it represents the key move-up buyer segment of the market. As long as this key segment is still fighting to regain an equity foothold, re-engagement back into the purchase market will continue to be on hold."

The HDI observed a small uptick in quarterly gains in both the West and Midwest, between 0.3 to 0.1 percentage points, respectively. The Northeast and South remained unchanged over the quarter, at 0.2 percent and 0.8 percent, respectively.

"These minimal changes reinforce housing’s continued moderation and suggest the initial thrust of the home buying season is starting to wane," the report said.

According to Clear Capital, data through July reports a 0.1 percentage point increase in quarterly gains, from 0.6 percent in June to 0.7 percent in July at the national level.

"While this minor increase, a carry-over from spring’s performance, is expected as we enter the thick of summer’s peak demand cycle, it reflects the overall contraction from spring’s initial surge," the report says.

Click here to view Clear Capital's Home Data Index (HDI) Market Report.

About Author: Xhevrije West

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Xhevrije West is a writer and editor based in Dallas, Texas. She has worked for a number of publications including The Syracuse New Times, Dallas Flow Magazine, and Bellwethr Magazine. She completed her Bachelors at Alcorn State University and went on to complete her Masters at Syracuse University.

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