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Top-Tier U.S. Home Values Lag Behind Rapid Growth

The top third of homes have not performed as well as the rapidly appreciating middle and lower tiers

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Take the San Francisco metropolitan area, one of the most extreme examples of the growing difference between high-end and low-end value growth.

GETTY IMAGES
Take the San Francisco metropolitan area, one of the most extreme examples of the growing difference between high-end and low-end value growth.
GETTY IMAGES

America’s most expensive homes are lagging behind their middle and bottom-tier peers, which have seen values rise rapidly since last year, according to Zillow’s November report released Thursday.

The median value of a "top-tier" U.S. home, which Zillow defines as the top-third of the market, increased 4.8% since last November. That’s slower than middle-tier homes, which grew 6.4% and a snail’s pace compared to the bottom third, which appreciated 9% from November 2015 to November 2016, according to Mansion Global's analysis of Zillow data.

More:Click to Read About Some of the Biggest Top-Tier Price Cuts (Ones Worthy of Black Friday)

Lumped together, home values across the board rose an astounding 6.5%, the fastest annual pace of appreciation since the heady days before the market crash in August 2006, according to the Zillow report.

"The U.S. housing market is really just a collection of dozens of smaller local markets that are all moving up and down to varying degrees and driven by various local factors including the health of their local economy and local supply and demand dynamics," wrote Zillow chief economist Svenja Gudell in the report. "A broadly improving national economy, in which job opportunities and wages are growing, is echoed in the smaller, local economies of many–but not all–individual metros."

But top-tier homes, on the whole, are dragging down the rapid rate of value growth in many cities.

Take the San Francisco metropolitan area, one of the most extreme examples of the growing difference between high-end and low-end value growth. The median top-tier home in the Bay Area appreciated a paltry 2%, while the median bottom-tier home appreciated 8.6% between November 2015 and November 2016.

One of the most expensive homes on the market in San Francisco this year, for sale in the affluent neighborhood of Pacific Heights and boasting a media room, a 900-bottle wine cellar and guest quarters, took a 22% price cut.  

Or consider Dallas-Fort Worth, where top-tier home home values rose 8.7%. That beats the national average, but it’s not nearly as fast as the metro-area’s middle-tier and bottom-tier homes, which appreciated 12% and a whopping 17.9%, respectively, according to data by Zillow.

Of course, there were outliers—cities where high-end homes kept pace with middle- and lower-tier appreciation. In Seattle for instance, all three tiers saw median value growth rise 12-13%.

More:Seattle and Portland Outperformed Housing Markets Even on a Global Scale, Click to Read More

The Napa region of California is one area that’s seen steeper value growth at the top than at the bottom. Top-tier homes there appreciated 7.8% year-over-year, while the value of middle- and lower-tier homes grew less than the national average.

Zillow tracks median home values over time in metro areas across the U.S. using sales prices and a proprietary algorithm that includes 5.2 million models run daily. Zillow’s system is built to keep a single outlier sale from skewing the numbers.