RealEstateEconomyWatch.com

In the five years since the market peaked in 2006, homes in the bottom quarter of the market have lost more value proportionately than those in the top tier.

A new analysis of price tiers over the past five years by Clear Capital found that lower priced homes experienced declines of 45 percent on average, outpacing the national average of 39 percent.

Higher priced homes, however, have lost only 25 percent of their value since the crash. However, higher priced homes lost more real value. Dollar wise, higher priced homes lost roughly $120,000 worth of value, while lower priced homes lost an average of $60,000.

Alex Villacorta, Clear Capital’s director of research and analytics, said that higher prices homes held their value better during the initial decline in 2006-2007 and in the initial years that followed. More recently, demand for entry level homes by first time buyers during the tax credit period and by investors has

“The lower end was first to go in terms of values and the top tier held out longer,” said Villacorta. In time, more expensive homes lost value and have lost more dollar wise than lower tier homes, he said.

Clear Capital’s data includes REO saturation levels on a market by market basis, and Villacorta said recently they have seen prices in some markets establish an equilibrium between REO and fair market value properties on a price per square foot basis. When markets have reached a mid-point equilibrium between fair market and REO values the gap between price tiers shrinks diminishing the depressive effect foreclosures have on fair market properties and allowing all properties in a market to appreciate over time.

However other markets, like Atlanta, are currently seeing a surge of REO activity in greater volumes than ever, making it impossible for prices to reach equilibrium. As a result, they are diverging and the gaps between price tiers are growing larger, he said.

Villacorta said Clear Capital will release more data and a forecast in its year-end report next month.