The highest tier of homes for sale, which has been the last part of the market to feel the effects of the housing recovery, is on the verge of switching from a buyers’ to a sellers’ market for first time in years.

The Institute for Luxury Home Marketing weekly market report today found that homes priced over $500,000 have reached a market action index of 29, one point below the level that typically indicates a sellers’ market because demand is high enough to quickly consume available supply.

The national median price in the ILHMI profile is $1,246,587 for an average asking price of $339 per square foot. The average days on market is 185 and falling. Some 23 percent of the luxury properties in the profile have had some sort of a price decrease while they have been listed, and 14 percent have been relisted.

Every one of ILHM’s 30 markets reports improving conditions. Shortest times on market were reported in Washington (135), Silicon Valley (139), San Francisco (148), Las Vegas (156), San Diego (165), Housont, (170), Austin (178), Atlanta (179), Boston (135) and Ventura (189).

Reports from markets around the nation confirm that sales are strong and inventories are getting tighter in the luxury sector. In the Denver area, buyers purchased up almost 37 percent more luxury single-family homes in February than they did in February 2012, according to a report by independent broker Gary Bauer. Bauer’s report, based on Metrolist data, showed that well-heeled consumers purchased 41 homes that cost at least $1 million last month, compared with 30 in February 2012. In January, 39 luxury homes sold, reported Inside Real Estate News.

The total dollar volume for luxury sales in February rose 30 percent to $57.5 million, compared with $44.25 million a year earlier. The dollar volume last month was up slightly from the $55.7 million in January.

Have real estate investments peaked? After years of growth during the Foreclosure Eva, investment purchases declined slightly last year after surging 64.5 percent in 2011. With the cost and competition to buy distress sales growing and prices for normal homes rising, will investors pull back and start cashing in their assets?

Despite multi-billion dollar buying sprees by well-funded Wall Street hedge funds, real estate investors bought fewer properties in 2012 than they did in 2011, which was a record year for investors. Investment-home sales declined 2.1 percent to 1.21 million from 1.23 million in 2011, but those sales had been well under a million during the market downturn. Owner-occupied purchases jumped 17.4 percent to 3.27 million last year from 2.79 million in 2011, according to an annual survey by the National Association of Realtors.

“Investors have been very active in the market over the past two years, attracted mostly by discounted foreclosures that could be quickly turned into profitable rentals,” said NAR’s Lawrence Yun. “With rising prices and limited inventory, notably in the low price ranges, investors are likely to step back in coming years.”

The price to be a real estate investor rose significantly last year. The median investment-home price was $115,000 in 2012, up 15.0 percent from $100,000 in 2011. All-cash purchases remain common in the investment market: half of investment buyers paid cash in 2012,. Forty-seven percent of investment homes purchased in 2012 were distressed homes. The median downpayment for both investment buyers was 27 percent, the same as in 2011.

Though investment buyers said they plan to hold the property for a median of 8 years, up from 5 years in 2011, indications are that changing economic conditions may put pressure on them to sell.

Six percent of homes purchased by investment buyers last year have already been resold, and another 8 percent are planned to be sold within a year. In the 2011 study, 5 percent of investment homes were already resold, and 8 percent were planned to be sold within a year.

“Property flipping modestly increased in in 2012,” Yun said. “However, this isn’t flipping in the sense of what took place during the housing boom. Rather, investors generally are renovating and improving properties before placing them back on the market to resell at a profit.”

Five Western states with the highest home price appreciation in February, Nevada (+19.3 percent), Arizona (+18.6 percent), California (+15.3 percent), Hawaii (+14.6 percent) and Idaho (+13.5 percent), led the nation to the biggest price increase in seven years.

Home prices nationwide, including distressed sales, increased 10.2 percent on a year-over-year basis in February 2013 compared to February 2012, the biggest year-over-year increase since March 2006 and the 12th consecutive monthly increase in home prices nationally, according to Corelogic’s February price report.

Excluding distressed sales, home prices increased on a year-over-year basis by 10.1 percent in February 2013 compared to February 2012. On a month-over-month basis, excluding distressed sales, home prices increased 1.5 percent in February 2013 compared to January 2013. Distressed sales include short sales and real estate owned (REO) transactions.

The CoreLogic Pending HPI indicates that March 2013 home prices, including distressed sales, are also expected to rise by 10.2 percent on a year-over-year basis from March 2012 and rise by 1.2 percent on a month-over-month basis from February 2013. Excluding distressed sales, March 2013 home prices are poised to rise 11.4 percent year over year from March 2012 and by 2.0 percent month over month from February 2013. The CoreLogic Pending HPI is a proprietary and exclusive metric that provides the most current indication of trends in home prices. It is based on Multiple Listing Service (MLS) data that measure price changes for the most recent month.

“The rebound in prices is heavily driven by western states. Eight of the top ten highest appreciating large markets are in California, with Phoenix and Las Vegas rounding out the list,” said Dr. Mark Fleming, chief economist for CoreLogic.