Faith D., 26, has been searching for her first home in the small eastern Tennessee town where she grew up, but the spring real estate market is moving in two very different directions. High-end sales are booming while lower-priced homes are slowing, a split that is exposing a widening gap between households that can keep buying and those that cannot.
The clearest numbers are at the top. In April, sales of homes above $1 million were up 9.3% from a year earlier, the fastest growth in the market, while sales in the $100,000 to $249,999 range fell 1.3%. Homes between $250,000 and $1 million were also slower, underscoring how uneven demand has become. Sub-$250,000 homes are usually the target for first-time buyers, and those buyers are still being squeezed by stretched affordability and fear of job loss.
That split is another sign of the K-shaped economy, where higher-income households are thriving and spending while lower- and middle-income households pull back as the cost of living rises. Selma Hepp said that is what appears in a lot of sectors right now: higher-income households are able to participate more broadly. In housing, that advantage is amplified by the fact that many current owners are sitting on sizable home equity positions, giving them a leg up when they want to move again.
Lawrence Yun said there is “a little more movement on the upper end,” adding that it could reflect the fact that the stock market is essentially at record-high conditions. The pattern is visible in places such as the Milwaukee suburbs, where real estate agent Marcus Auerbach said sales of higher-end homes at about $800,000 and above have been strong this spring while moderate- and entry-level homes have taken longer to sell. He said buyers who put $35,000 down on a starter home five years ago may be walking away today with $200,000 to $250,000 in equity. “Move-up buyers have a distinct advantage because they’ve been riding this wave,” he said. “For them, it has played out really well.”
That edge is helping push more spending into the upper tier. Auerbach said all-cash offers also seem to be on the rise in the Milwaukee suburbs, and he noted that the area is not exactly cheap anymore. PulteGroup, the third-largest homebuilder, has seen strong demand for move-up homes and senior living, along with more spending on high-end extras such as premium lots. Ryan Marshall, the company’s chief executive, said last month on an earnings call that first-time buyers on the lower leg of the K continue to struggle with stretched affordability and fear of job loss.
For Faith, that divide is not an abstract chart. She said homeownership felt like a goal within reach when she was in college, before prices skyrocketed during the pandemic and changed the math in her hometown. Her search is happening just as the broader housing market remains sluggish overall, with the top of the market moving more freely than the bottom and leaving first-time buyers waiting for a break that has not come.
The next test is whether more owners at the top keep trading up while younger buyers stay locked out. If that happens, the housing market will keep behaving less like one market and more like two.
