Homeowners at the bottom of the housing tier emerged from 2014 in a stronger position than in previous years, with home values up 6.8% year-over-year, Zillow (Z) said.
Lower-valued homes were hit hardest by the recession and experienced an unsteady recovery compared to high-end homes, and according to Zillow Chief Economist Stan Humphries, those lower-value homes are key to the overall recovery.
“In many ways, for the housing market to fully normalize, it has to start at the bottom,” Humphries said.
“More lower-end home sellers will help meet demand from entry-level buyers, and these sellers in turn will re-enter the market in search of a slightly pricier home, which will entice more middle- and upper-tier sellers to list their homes. As the economy gets stronger, we expect more young adults to strike out on their own, moving out of friends’ and parents’ homes. This will create strong demand in coming months, especially for less expensive homes,” he explained.
And although homeowners in the bottom price tier are still 17% shy of their pre-recession peak values, it is still up from the 31% value loss they suffered when home values hit rock bottom in January 2012.
As a result, it opens up more opportunities for millennials to start joining the mortgage market.
Zillow expects millennials to overtake Generation X as the top home-buying generation in 2015.
Metros with the biggest jump over last year in low-end inventory are Las Vegas, with 66.9% more low-end homes on the market in December 2014 than December 2013; Riverside, with 47.3% more and Washington, D.C. with 45.7% more.