SEATTLE—For commercial property, a recent trend has seen greater price appreciation in the market's lower tiers. In the residential sector, though, the reverse is true: Zillow said Thursday that in 24 of the 35 largest US housing markets, the lowest-priced homes are least likely to have recovered their pre-recession values.

A case in point is Detroit, where nearly two-thirds of the most expensive homes have regained the value they lost when the market collapsed in 2008, and the average top-tier price, $284,800, is higher than it was during the housing bubble. In contrast, Zilow says that homes in the bottom third have only regained an average of 33.7% of their lost value over the past nine years, and are now worth a median of $53,000.

“The housing market as a whole is moving at a steady clip, with high demand and low inventory combining to maintain strong home value appreciation,” says Svenja Gudell, chief economist with Zillow. “Most new construction has been at the higher end of the market, so demand for the limited supply of entry-level homes is pushing up their values, but these homes also lost more value when the bubble burst.

“Many of these homeowners are still waiting to see their homes come back to where they were about 10 years ago,” she continues. “Even as headline numbers show an overall recovery, there are still thousands of Americans struggling to bounce back from the housing bust.”

At the same time, Zillow says, limited inventory gives would-be buyers few options. Nationally there were 12.6% fewer homes available this past August than there were in the year-ago period. San Jose and San Diego saw the biggest annual declines in inventory: 59.4% and 37.2%, respectively.

“Market conditions continue to be stressful and challenging for both prospective first-time buyers and homeowners looking to trade up,” says Lawrence Yun, chief economist with the National Association of Realtors. “The ongoing rise in home prices is straining the budgets of some of these would-be buyers, and what is available for sale is moving off the market quickly because supply remains minimal in the lower- and mid-price ranges.”

Earliert this week, NAR reported that total existing-home sales, including both single-family homes and for-sale apartments, slipped 1.7% in August to a seasonally adjusted annual rate of 5.35 million, compared to 5.44 million in July. Last month's sales pace is 0.2% above August 2016, and is the lowest since that time.

“Steady employment gains, slowly rising incomes and lower mortgage rates generated sustained buyer interest all summer long, but unfortunately, not more home sales,” says Yun. “What's ailing the housing market and continues to weigh on overall sales is the inadequate levels of available inventory and the upward pressure it's putting on prices in several parts of the country. Sales have been unable to break out because there are simply not enough homes for sale.”

Instant Insights /

Lowest-Cost Homes Lag Pricing Recovery

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