Growing Housing Market Segmentation

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The housing market is not performing as well as expected. Even though the prices have increased, demand is still very low and this has a negative impact on sales. One of the primary reasons for the lack of overall improvement is the ever increasing segmentation of the market in terms of location and in terms of price range as well.

The latest official data from April 2014 reveals a 5.2% increase in prices and a 4.2% decrease in sales. At the same time, house prices are still around 7.6% lower compared to their level before the crisis of 2007. These are clear indicators that the market is not recovering as well as analysts have predicted.

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The latest report of the National Association of Homebuilders reveals that throughout June 2014 only 56 of the 350 metro areas in the US have levels of housing activity which are normal or higher than predicted. This means that only a very small fraction of the local markets are performing on par with expectations. This is explained with the ever decreasing affordability of homes especially in large cities with limited land for new construction and high real estate investor activity.

The low inventory has a negative impact as well. Despite its mid-June weekly increase of 13% adjusted on an annual basis, it is still below levels which would have a major downward impact on home prices. In this situation, the low affordability is likely to remain, even if mortgage standards are loosened somewhat.

There is an even clearer segmentation by price range. Over the past year, the homes worth over $1 million marked the highest increase in sales of 5.2%. They were followed by the properties in the range from $750K to $1 million whose sales went by 2.4%. The sales of homes in the range from $250K to $750K rose by just 0.25% on average. The sales of homes worth between $100K and $250K fell by 5.1%. The two segments with the highest increase form just 4.5% of the whole market.

Overall, the segmentation will continue to have a negative impact on the housing market as a whole.

Mailynne

Mailynne

Mailynne serves as a content strategist and writer for mortgage.info. She is ahighly task-oriented strategic planner and experienced writer. Over the past 10 years, Mailynne has managedcontent for both large corporations, non-profits and businesses. She specializes in managing digital marketing,branding and web development content. Mailynne has worked with a variety of local, national and international organizations.

Contact: mailynne@mortgage.info
Mailynne

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