Back in 2005, when the real estate market was steaming, one of the things that occurred to me was that real estate appreciation was driven from bottom to top. That is, it was the intense demand at the lower priced properties that pushed up the prices of starter homes that then pushed up demand at homes moving up the price ladder.
In 2011, it is still the lower price end of real estate that drives the overall market. It’s just that instead of driving the market up, for the past few years it’s been driving the market down.
If you remember when the market began to slide in 2006, it was the lower priced houses and condos, along with properties in new or unfinished developments that were the first to be affected by the downward trend. The higher end properties in economically established communities fared well for at least a couple of years longer, because the effects of the lower end slide hadn’t yet affected the higher priced properties. Recently, the price decline of the higher priced properties has been more noticeable because the decline happened in the more recent past.
Interestingly, it seems that most of the “bottoming out” in the real estate market has been happening at the lower price point. Hopefully, if recent history repeats itself, we’ll see the same “bottoming out” moving up the price ladder and the beginnings of real estate appreciation.
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