Compared to homes in the middle and highest price tiers, properties at the low-end weathered the storm of the housing boom and bust the best, but only in some markets, according to the Urban Institute.
While the housing crisis impacted homes differently depending on their price range, national averages analyzed by the Urban Institute suggest that the lowest-priced homes rose higher during the boom and recovered faster from the bust.
Nationally, from 2001 to 2006, the price of the lowest-priced homes grew faster (88%) compared with homes in the middle-low (80%), middle-high (77%) and high (65%) price tiers, respectively, according to data from the Urban Institute and the CoreLogic Home Price Index.
Following the collapse of the market, low-tier homes declined 26% from 2006 to 2009—higher than the high-tier’s 22% drop, but not as severe as declines in middle-low (28%) and middle-high (31%) tiers.
Since then, it has been those homes in the lowest-price tier that have recovered the most, with prices up 33%—now only 2% below its peak level. By contrast, prices of middle-low, middle-high and high-priced tiers rose 16-23% over the same period.
But this phenomenon among home prices in the low-end is largely regional, the Urban Institute notes, citing Minneapolis and Atlanta as two examples to illustrate home price dynamics.
Minneapolis is more reflective of the national trends, where the lower-priced tier fared much better than its higher-priced counterpart. In the years preceding the crisis, from 2001 to 2006, homes in the lowest-tier grew about 61% compared with 49-54% for homes in the higher tiers.
Like the national trend, homes in the highest-tier depreciated the least during the years of the crisis from 2006 to 2009, however, after the crisis, the lowest-priced tier outperformed all other price tiers, growing 40% while its counterparts only appreciated between 8% to 17%.
Atlanta is the flip side of this dynamic. Before the crisis, home price appreciation was much faster for the lowest-priced tier than all other tiers, but during the crisis, low-end homes experienced the biggest price drop at 31%.
Additionally, after the crisis, Urban Institute notes that the price growth of low-end homes has not returned to the high levels of the boom years, and still lags behind the more stable high tier.
View the Urban Institute analysis.
Written by Jason Oliva