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Report: Why High-Priced Homes Are Leaders in the Recovery

Historically, higher-priced homes are a leading indicator of the real estate market and tend to lead the market during times of recovery, according to the Home Value Forecast (HVF) report jointly released by ""Pro Teck Valuation Services"":http://www.proteckservices.com/ and ""Collateral Analytics"":https://collateralanalytics.com/.


The companies assessed price changes in the Bay Area and around Los Angeles and found the high-end markets showed stronger price growth compared to lower-priced areas.

According to report, the markets for higher-priced homes tend to be in desirable locations where supply is very limited. The buyer profile is also different in these markets.

""Buyers in these markets tend to be better capitalized, using more equity and lower loan-to-value mortgages. These markets have been less affected by tight underwriting, which has plagued the middle and lower price ranges where loan-to-value averages are generally much higher,"" the report explained.

According to data from the report, upscale cities in the Bay Area have shown strong price performance and have seen their average sold prices move up to all-time record levels.

For example, the HVF compared performance for lower- and higher-priced homes in Palo Alto and found the largest and most expensive homes were the first to show price gains over the past year. Furthermore, the rate of price appreciation for higher-priced homes was much greater, too.

""[T]his suggests that high price homes are market leaders both across different markets as well as within the same market,"" the report concluded.


In addition, in Los Angeles County, the Manhattan Beach market has seen prices rise to all-time highs.

""This should be viewed as confirmation that the Los Angeles county real estate market is in the early stages of a new upward-cycle in home prices,"" said Michael Sklarz, principal of Collateral Analytics and contributing author to the report.

The HVF also included a list of the 10 best and worst performing metros for February based on factors such as sales/listing activity and prices, months of remaining inventory (MRI), days on market (DOM), sold-to-list price ratio, and foreclosure and REO activity.

Sklarz noted one new entrant to the list was Indianapolis.

""Like a number of Midwest markets, Indianapolis did not participate in the nationwide housing bubble and its home prices have been among the most affordable in the country for many years. It's also a market with compelling rental yields for both institutional and individual single family home investors,"" he said.

In addition, Sklarz explained markets such as Phoenix and Sacramento dropped off the list because their year-over-year sales counts are down due to lack of inventory.

*Top Markets*

# Boston-Quincy, Massachusetts
# Cambridge-Newton-Framingham, Massachusetts
# Indianapolis-Carmel, Indiana
# Santa Ana-Anaheim-Irvine, California
# Oxnard-Thousand Oaks-Ventura, California
# Raleigh-Cary, North Carolina
# Los Angeles-Long Beach-Glendale, California
# Wichita, Kansas
# Colorado Springs, Colorado
# San Antonio-New Braunfels, Texas

*Bottom Markets*

# Cape Coral-Fort Myers, Florida
# Rochester, New York
# Baton Rouge, LA
# Albany-Schenectady-Troy, New York
# Greenville-Maudlin-Easley, South Carolina
# Tampa-St. Petersburg-Clearwater, FL
# Mobile, Alabama
# Little Rock-North Little Rock-Conway, Arkansas
# Shreveport-Bossier City, Louisiana
# Spokane, Washington

About Author: Esther Cho


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