Momentum in the middle of the US housing market is set to drive a strong recovery this year, according to experts.
Figures from Clear Capital show that there is a growing gap between the bottom and top tiers of the US property market, an opening that is expected to restore healthy demand from both first-time and traditional buyers.
All major regions of the US saw sales decline in December 2014, according to recent figures from the National Association of Realtors - despite interest rates being at their lowest level of 2014.
Lawrence Yun, NAR chief economist, said that any rise in sales in the coming months would "largely depend on the willingness of current homeowners to realise their equity gains from the past couple years and trade up".
Indeed, house price growth in America, which was once driven by investor activity, is now being sustained by buyers, which is good news for first-time house-hunters. Indeed, the climb in values continues to bring more homeowners out of negative equity, which is expected to encourage more buyers to move up the property ladder, opening up more space on the lower rungs.
While moderate price growth continues across all segments of the housing market, the top tier has seen its quarterly rate of increase slow to 0.3 per cent (as of Q4 2014) from 1 per cent in the first nine months of 2014.
"Year-over-year, this tier experienced the lowest price growth rate of 3.6 per cent among the three national tiers," says Clear Capital's report. "At its current pace, continued moderation in the top tier could push quarterly price growth into negative territory in 2015."
At the same time, the lower end of the market enjoyed double-digit growth of 10.2 per cent year-on-year in January 2015, with a quarter-on-quarter gain of 1.5 per cent; a divide that could spark a "domino effect... the catalyst for balanced demand across all sectors of the market".
"The rate of appreciation for top tier homes is stalling, which is a more direct reflection of waning fair market demand. While this is a concerning development, there is a silver lining. The moderating upper tier may give traditional buyers a moment to catch their breath, and entice move-up buyers to enter this segment of the market," says Dr. Alex Villacorta, vice president of research and analytics at Clear Capital.
"The ripple effect of opening up inventory all the way down the price spectrum could provide opportunity and motivation across all segments, including first-time buyers, to enter the marketplace."
Photo credit: Cyndie