Housing Market Splits: Luxury Homes in High Demand While Starter Homes Face Slump
The U.S. housing market is showing a stark divide between luxury and starter homes, according to new Zillow data from June 2026. Starter home sales fell by 5.4% year over year in May as inventory rose by 4.5%, with more price cuts and fewer bidding wars. In contrast, luxury home sales increased by 6.2% during the same period, driven by strong demand and shrinking supply. The disparity is most pronounced in cities like San Francisco, where luxury home sales surged 21.6% year over year while starter home sales dropped just slightly (-1.2%). Economic factors are playing a role: rising everyday costs and weak consumer sentiment are deterring potential buyers of more affordable homes, whereas stock market gains have bolstered purchasing power for high-income households. Zillow notes that the current environment offers opportunities for financially prepared buyers in the starter home segment due to increased options and seller flexibility. However, economic pressures continue to hold many back from making a purchase.
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Topics: housing market inventory levels luxury homes price cuts starter homes