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Which homes see bigger jump in value -- costly or less expensive ones?

First-time home buyers
First-time home buyers 04:36

While getting ahead is an uphill battle for many Americans, buying a starter home can be a big step in the right direction.

That's because the least expensive homes have seen the largest percentage jumps in value, a trend that is apparent after a year and even more after five, an analysis by Zillow found.

In looking at home values over the past year, the least costly homes showed an 8.5 percent gain in their worth compared to a 3.6 percent increase for the most costly abodes, according to the findings by the provider of real estate information. Over the past five years, owners of starter homes saw their equity grow by 44.4 percent, while folks living in the top-of-the-line houses gained 26.6 percent.


"When the housing market crashed, owners of the least valuable homes were especially hard hit, and lost more home value than homeowners at the upper end of the market," Zillow senior economist Aaron Terrazas said in a release. "Since then, though, demand for less expensive, entry-level homes has built steadily, causing prices to grow rapidly. As a result, these homeowners have been able to build wealth at a faster pace than owners of more expensive homes."  

One unfortunate aspect, however, is the very factors making the cheapest homes a good investment is that they are in limited supply, with nearly 18 percent fewer entry-level homes on the market compared to a year ago, Zillow said.


Americans buying starter homes in Tampa, Florida, saw the greatest gains in home equity, with the least expensive homes in the city worth 20.4 percent more than a year ago, Zillow found. In Las Vegas, the most affordable homes appreciated 19.9 percent from a year ago. 

Still, the findings were not across the board in the large U.S. markets, with the most costly homes gaining value faster than starter homes in three markets: San Francisco, Seattle and San Jose, California.

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