Real Estate Crash Hit Lower-Priced Homes The Hardest

When the housing bubble popped — in 2006, 2007, or 2008, depending on where you were — chances are that the value of your home took a nose dive. But who got hit worse, the top of the market or the bottom?

In an effort to answer this question, Clear Capital, a valuation and analytics firm in Truckee, Calif., (near Lake Tahoe) analyzed the market in terms of “tiers.” Take as a starting point the national peak of the market, that glorious, golden-haze summer of 2006.

At that point, any home that sold for less than $150,000 was in the bottom quarter of properties — what Clear Capital calls a “low-tier” house. Any home that sold for more than $395,000 was in the top quarter of properties — a “top-tier” house. The remaining two in the middle were — of course — “mid-tier.”

(MORE: Boomer Kids Out-Saving Their Parents)

What Clear Capital has found is that not all those layers fell by the same amount. The average mid-tier house fell in value by 41%, while homes in the low tier fell 46.3%. Homes in the top tier, though, have lost only 26.8% of their value since the crash. If you picture a wedding cake with three even layers, what happened is that the bottom layer pancaked more than the other two.

So is this another tale of the rich getting off relatively easy? Maybe not, according to Alex Villacorta, director of research and analytics for Clear Capital.

“You may argue that by percentage, what happened in the top tier is an easier hit to take,” Villacorta notes. “But for people who are a little bit overextended, that’s an absolute hit of $106,000.” The low tier, by contrast, saw valuation suffer by an average of $69,500. The average mid-tier house, for its part, dropped $100,900.

That’s the bad news. The good news is that, according to Villacorta, it looks like all tiers of the market have adjusted to the large numbers of foreclosures and the subsequent resale of those properties by banks. In other words, while your local market may not be great, it’s probably fairly stable. And even if there’s an onrush of more foreclosures — which some analysts predict will happen in 2012 — prices are unlikely to tank.

(MORE: 5 Most Surprising Findings from the 2010 Census)

That relative stability is due in large part to the rental market. Former homeowners still need to live somewhere, of course, and their demand for rentals has led to the recovery of those low tier homes. Villacorta says investors have been buying empty properties from banks and improving them for renters. The result: The decline in home prices slowed during 2011.

“In terms of our Home Data Index, we see stabilization on a national level,” Villacorta says. “We’ve seen only a 1% drop in prices since January — and no change at all in the past six months.”