[1]Lower-priced homes stood a better chance at survival during the 2006-2009 housing crisis, according to an Urban Wire blog post by the Urban Institute [2] and authors Jun Zhu and Bing Bai. Not only did cheaper homes recover more quickly from the bust, according to national averages and location data found by the Urban Institute [3], but cheaper homes became more expensive during the boom as well.
According to the post’s authors, there are four price tiers when it comes to home values: low, middle-low, middle-high, and high. The institute found that on a national level the homes in these tiers follow the same trends of boom, bust, and recovery, but each has slight variations of numbers.
Prices of cheaper homes grew about 88 percent from 2001 to 2006, in comparison with 80 percent for the middle-low tier, 77 percent for middle-high, and 65 percent for the high.
Urban Institute data reveals that the low tier fell 26 percent from 2006 to 2009 after the housing market collapsed, a four percent increase over the high tier. The middle-high and middle-low tiers endured the most impact with a drop of 28 and 31 percent. The lowest tier experienced the best recovery, with prices up by 33 percent, a 2 percent deficit from its peak level. On the other hand, the middle-low, middle-high, and high-priced tiers increased 16 to 23 percent over the same time frame.
The authors found that the prices of homes can mostly be attributed to region—essentially where the home is located will affect the cost of the home. They cited Minneapolis as prime example of the national trend that the lowest-priced tier did better than the high-priced tiers. Homes in the lowest tier appreciated about 61 percent compared with 49 to 54 percent for homes in the higher tiers before the crisis in 2001 to 2006. While the crisis was happening during 2006 to 2009, the highest-priced homes experienced the least amount of depreciation. Meanwhile, after the crisis, the 8 to 17 percent that the middle and high tiers appreciated fell short to the 40 percent appreciation that the lowest-priced tier experienced.
To see the full blog post, visit: Urban.org [3]