Phoenix leads the pack, with prices up 26 percent from a year ago, according to Clear Capital. The "REO saturation" there, that is the share of sales that are foreclosures (Real Estate Owned) is 17 percent. Mind you, that is down from over 50 percent just a few years ago, when the market was still crashing. The story is the same in Las Vegas, where REO saturation is still 38 percent, prices are up over 15 percent annually. Investors have cleaned out the inventory so much that they are now bidding up prices higher than any expectations, and that is pushing many potential owner-occupant buyers out, especially first-time home buyers.
In Florida, where there is a huge pipeline of distressed loans, foreclosures had been severely delayed due to the so-called "robo-signing" foreclosure processing scandal. After years of negotiations and now final bank settlements, foreclosures are moving again. This increased inventory may be what is slowing the big price gains.
More concerning is that the investor price drives are not playing out in other parts of the country, specifically in the South and Midwest.
In St. Louis, Chicago, Charlotte and Dallas, distressed properties are making up about one third of the market, often higher than markets out West, but home prices are either flat or down annually, a far cry from the jumps out West. That is because investors are not as interested in these markets. As banks now begin to ramp up foreclosures, not just in Florida, but especially in states like New York and New Jersey where judges had been holding up the process as well, more distressed inventory will come on the market with fewer potential buyers. That will push prices there down.
Essentially, the recovery is becoming increasingly bifurcated, with much of the nation still suffering as some markets see bubble price dynamics.
(Read More: One Overlooked Fact About the Housing Recovery)