Main Content

Real estate market tiers: What are they and how many are there?

Different Levels of Housing

Broadening your knowledge of real estate in general can be tough. There are a lot of words thrown around, some of which you are most likely unfamiliar with if you are a first-time buyer, seller, or investor. For instance, there’s the phrase “real estate market tier.” 

Unbeknownst to many, different real estate markets are categorized depending on their level of development. That is what the tiers are all about. As of date, there are three tiers: I, II, III. 

Tier I

The first and highest level in real estate market development is Tier I. These are cities and communities with established real estate markets, such as Los Angeles County (which includes Pasadena and La Cañada real estate). Development doesn’t stop at real estate options since Tier I cities also have a wide range of amenities and services, not to mention a robust local economy. As such, homes for sale here tend to be on the more expensive side. 

Investors often shift their focus on Tier I cities whenever there’s an economic downturn as they are also likely to survive the ordeal. Risks are relatively few, but as mentioned, the prices can be steep. 

Aside from Los Angeles, other Tier I cities include New York City, San Francisco, Washington, D.C., Boston, and Chicago— basically major cities.

Tier II

“Up and coming” is what best describes Tier II real estate markets. Development is a continuous process in these cities, and the potential is staggering. Although not as established as Tier I cities, markets under Tier II are magnets for businesses, real estate developers, investors, and young professionals. 

What is so great about Tier II cities is that real estate options are relatively inexpensive here compared to Tier I cities. As these markets continue to grow and eventually mature, however, prices will surely increase. This is why Tier II real estate markets are a favorite among investors. People can purchase real estate for a reasonable price and recoup their losses if things turn out well. 

Tier III

Tier III cities are relatively undeveloped. That said, these markets, depending on their locations, can be full of potential. Real estate prices are the most affordable here, but the choices can be limited or nonexistent. 

Think of Tier III cities as blank slates or canvasses, ready for development. Because of the tremendous opportunities for growth, Tier III cities also attract investors and developers. 

Development, however, takes time. Before becoming a Tier II or Tier I city, Tier III markets must build facilities and develop resources to attract and support more investments. Aside from the long process, developing a Tier III city is also a costly and risky endeavor. 

Now that you know a thing or two about real estate market tiers, it is easier to understand why investing in Pasadena and La Cañada real estate are smart choices. Browse my website to see the latest property listings in the area or connect with me, Kathy Seuylemezian, today at 818.949.5205 or Kathy(at)imuragent(dotted)com to learn more.

Skip to content