Owners of Least Valuable Homes Saw Recovery in 2014

Owners of low-value homes — those hit hardest by the housing recession — had a solid year of recovery in 2014, with home values growing faster than the market as a whole.

Home values in the bottom third of the market peaked in 2007 at a median of $122,100. Then they tumbled 31 percent, bottoming out at $84,100. Their recovery has been rocky, but in 2014, they saw home values gain 6.8 percent. At a median value of $101,400, those homeowners are still not back to their pre-recession peak, but for millions, the value increase means they are in a strong enough position to sell or refinance.
Many of those homes will enter the market just as millennials, driven toward homeownership by rising rents and incomes, are looking to buy. Zillow expects millennials to overtake Generation X for the first time as the biggest group of homebuyers in 2015.

“In many ways, for the housing market to fully normalize, it has to start at the bottom,” said Zillow Chief Economist Dr. Stan Humphries. “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.”

For more about the fourth quarter Zillow Real Estate Market Reports, check out Zillow Research.