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HIGH END OF THE REAL ESTATE MARKET SHOWS STRENGTH

Given that the real estate market is supposed to be in free fall, some strange things have been happening recently in Mill Valley.

It is one of the expensive suburbs of San Francisco just over the Golden Gate Bridge, and much of the housing market there seems to be doing just fine. One three-bedroom house sold for $1.4-million last month without being officially put on the market. The seller accepted a pre-emptive bid - $20,000 above the asking price - from somebody who had heard that the house was about to be listed.

"The homes that are having a hard time selling are the average-priced homes," said Vanessa Justice, a real estate agent with Pacific Union GMAC. For upper-end homes, she said, "it's actually pretty crazy right now."

It has been a while since real estate agents used the word "crazy" in a positive way, but Justice is onto something here: The high end of the market is surviving the slump much better than any other segment.

This split in the market helps explain why the sales of Manhattan apartments, some of the priciest homes in the country, have remained fairly strong. The national trend has gone largely unnoticed, though, because neither the federal government nor the National Association of Realtors - the main sources of housing data - report statistics for different price segments.

But after just about every home sale, documents must be filed with a local government office. A research firm called DataQuick Information Systems gathers these records, and a New York Times analysis of them shows the story of today's real estate market is really two different stories.

In the New York region, sales at the top end - that is, homes in the most expensive 5 percent of the market - have been rising, while they have been falling in the middle and bottom of the market. The same is true in the San Jose, Calif.; Seattle; Denver; and Houston areas. In San Francisco, Los Angeles, Phoenix and Miami, high-end sales are down but not by nearly as much as sales in other price segments.

The high-end market is far from booming, to be sure. Many houses would still sell for less today than they would have a year ago. But the market has stayed strong enough to catch a lot of buyers and sellers off guard.

There seem to be three main causes of the split in the market. The first is that affluent families continue to do better than others, thanks to healthy income gains and a rising stock market. "To some extent, it is the rich getting richer," Andrew LePage, an analyst at DataQuick, explained.

The upper end of the market has been helped by an influx of well-off foreign investors whose buying power has grown with the recent decline of the dollar.

Finally, the recent rise in interest rates and the problems in the mortgage market have had a much bigger effect on low-income and middle-class buyers than affluent ones.

As Mark Zandi, chief economist of Moody's Economy.com, summed up the market: "The low end is getting creamed. The middle is struggling. The high end is running on its own dynamic."

Up next:ON THE SHELF

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