K-shaped economy shows up in housing: Luxury sales rise as starter-home buyers struggle
Get the Finance newsletter
Daily finance — markets, central banks, M&A, the prints that move money. Free.
- Starter-home sales fell 5.4% year over year in May even with 4.5% more inventory available, per Zillow, with the typical starter-home value at $202,000 nationally — up 2.3% from May 2025.
- Luxury home sales in the top 5% of values (roughly $1.9 million nationally) rose 6.2% year over year in May, mirroring a broader K-shaped economy where high-end demand is fueled by stock-market gains.
- The average 30-year fixed mortgage rate sat at 6.75% as of the report, up from a dip below 6% in late February after the onset of the Iran War reignited inflation fears.
- The median existing-home price hit an all-time high of $440,600 in June, 49.2% above June 2020, per the National Association of Realtors, though annual growth slowed to 1.8%.
- The bipartisan 21st Century ROAD to Housing Act became law in July to expand supply and restrict institutional investors, but a 4-million-unit shortage means relief could take years to reach buyers.
- Redfin chief economist Daryl Fairweather said high-end buyers can liquidate stocks or pay cash to bypass mortgage rates entirely, while starter buyers face a monthly payment of roughly $1,310 on a $202,000 loan at 6.75%.
Why it matters: First-time and lower-income buyers face a double bind: starter-home inventory is up 4.5%, yet a 6.75% mortgage rate on a $202,000 home costs about $226 more per month than the same loan at 5%. Wealthy buyers sidestep that arithmetic entirely by selling stocks or paying cash, which is why luxury sales climbed 6.2% even as the starter segment shrank — and the new bipartisan housing law won't close that gap quickly against a 4-million-unit shortage.
