In a report released this week, Clear Capital linked high levels of distressed sales activity with high levels of home price appreciation, something that may seem out of the ordinary.

However, in a conversation with DS News Wednesday, Alex Villacorta, VP of research and analytics at Clear Capital, explained that this trend is in keeping with the “first-in-first-out” recovery the nation has been experiencing over the past 18 months. In other words, markets that experienced the worst of the housing crisis—and still have large numbers of distressed sales—are the markets that are now rebounding the fastest.

Furthermore, Villacorta explained, “Everything about the housing market over the last 10 to 13 years has been anything but normal. I would even argue that the recovery itself is atypical.”

Markets such as Phoenix; Las Vegas; and Sacramento, and Riverside, California, experienced some of the most volatile price changes over the past several years. Prices in these markets doubled in a matter of a couple of years and then overcorrected on their way down, according to Villacorta.

The result is a market prime for investors to find “great bargains,” he said.

Despite continued high levels of distressed sales, these markets are currently experiencing “tremendous growth,” Villacorta said.

There’s no doubt investors are playing an overwhelming role in these markets’ recoveries, leading some to question whether we are seeing a true recovery. In response to these doubts, Villacorta said, “Prices are going up. There’s really no ambiguity about that.”

A better question would be whether the current recovery is “sustainable,” he said. On this question, Villacorta agrees with many analysts who say the current rate of price growth and investor activity is not a model that can be maintained for very long.

Clear Capital predicts price growth next year will measure about half of what it has been this year—about 4 percent in 2014. While certainly lower than today’s appreciation rates, Villacorta says this rate is closer to the historical norms the market has maintained over many decades.

Investor activity may decline abruptly in some markets like Sacramento, where there has been such a sudden surge; but other markets will likely see a slower decline in investor demand.

Villacorta also pointed out that some markets will adapt well to declining investor share. The Bay Area, for example, where tech jobs are booming, “is a good example of the traditional buyer segment coming in to replace investor activity without skipping a beat,” he said.

“The big question mark is still on the broader economy,” according to Villacorta. He says jobs and consumer confidence must pick up in order for the housing recovery to continue.

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