Thursday, August 28, 2008

Which Way? The Market Diverges

by Osman Parvez
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Dean Baker is reporting on the divergence between high and low-end homes. He writes, "In several of the former bubble markets higher end home prices appear to be stabilizing, while prices for homes in the bottom tier continue to fall rapidly."

In the Case-Shiller data for markets Baker examines, the low end is dropping rapidly while the high end is better holding its value. In LA, the bottom 1/3 fell by 3.2% in June and 12.2% quarterly. The top 1/3 fell only by 0.2% and 0.8%, respectively. He notes similar patterns in other markets.

As you know from reading House Einstein, the same pattern presented itself this summer in Boulder. According to the House Einstein Indexes, at the low-end prices on a $/SQFT basis in 2Q08 were flat from a year ago (0% appreciation). Meanwhile, prices for luxury homes were up 2.8%. The confusing part is that the high-end of the market here in Boulder had much larger inventory relative to sales, nearly 19 months as of the last Index (July 15th). The low-end had less than half that, about 8 months of inventory.

Original image: thetruthabout



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