The housing market is splitting in two: Luxury homes are in high demand while starter homes sit
Rhea-AI Summary
Zillow (NASDAQ:Z) reports that the U.S. housing market is increasingly split between starter and luxury homes. Starter home inventory rose 4.5% year over year in June, with price cuts on 25% of listings and sales down 5.4% in May. In contrast, luxury inventory fell 5.2%, luxury sales climbed 6.2%, and price cuts affected 20.6% of listings. According to Zillow, the typical starter home is valued around $202,000 (up 2.3% YoY), while the typical luxury home is about $1.9 million (up 3.1% YoY). San Francisco shows the sharpest divergence, with luxury sales up 21.6% and starter sales down 1.2% year over year.
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News Explained
Zillow’s split uses regional value bands: starter homes are in the 5th–35th percentile and luxury homes in the top 5%, so the comparison is relative within each market rather than based on one national price cutoff.
News Market Reaction – ZG
In the Jul 29 session, ZG gained 1.51%, reflecting a mild positive market reaction. Argus tracked a trough of -6.0% from its starting point during tracking. Our momentum scanner triggered 30 alerts that day, indicating elevated trading interest and price volatility.
Data tracked by StockTitan Argus on the day of publication.
AI-generated analysis. How Rhea-AI works. Not financial advice.
Rising starter home inventory and more price cuts signal opportunity for buyers, but economic headwinds are keeping them on the sidelines
- There are
4.5% more starter homes available than there were last year, price cuts are more common, and there are fewer bidding wars. Yet starter home sales fell5.4% in May, according to new Zillow data. - The slowdown of starter home sales is especially stark when compared to a booming luxury sector. Luxury home sales are up
6.2% year over year, as of May. San Francisco is the starkest example. Luxury home sales surged21.6% year over year in May, while starter home sales fell1.2% .
Zillow defines starter homes for this analysis as those in the 5th to 35th percentile of home values in a given region. Nationally, the typical starter home is worth about
Across nearly every metric, conditions are moving in opposite directions in these two segments. Inventory for starter homes rose
"The best time to buy a home is when nobody else wants to," said Kara Ng, senior economist at Zillow. "Starter home buyers today have more options, more negotiating power, and sellers who are more willing to deal. The challenge is that the same financial pressures making it harder to save for a down payment are also making it harder to take advantage of that opportunity."
Despite friendlier conditions at the more affordable end of the market, sales are down, while the inverse is true at the top of the market. Starter home sales fell
The divergence is sharpest in
What's holding buyers back
Starter home buyers are making decisions in a tough economic environment. Hiring has slowed, inflation remains elevated, and consumer sentiment has fallen to historic lows. In conditions such as these, households tend to delay major financial commitments like a home purchase.
Higher-income households, however, are facing a very different set of circumstances. Stock market gains have bolstered purchasing power at the top of the income spectrum, keeping demand for luxury homes strong.
What buyers can do now
As conditions shift in favor of buyers, those who are financially prepared will be best positioned to move when the moment is right. Zillow Home Loans' BuyAbility℠ tool gives buyers a personalized, real-time estimate of the home price and monthly payment that fits within their budget, and shows listings within their BuyAbility directly in their Zillow search.
Metro Area* | Starter Home | Luxury Home | Starter | Luxury | Starter | Luxury |
4.5 % | -5.2 % | -5.4 % | 6.2 % | 25.0 % | 20.6 % | |
6.7 % | -15.9 % | -22.3 % | -14.2 % | 16.7 % | 11.6 % | |
5.0 % | -16.4 % | -5.3 % | 10.6 % | 22.8 % | 18.7 % | |
-4.1 % | -7.3 % | 0.0 % | 24.9 % | 22.4 % | 18.7 % | |
-2.9 % | -9.0 % | -2.8 % | 18.1 % | 33.0 % | 28.4 % | |
1.1 % | -1.6 % | -8.9 % | 8.7 % | 26.9 % | 22.9 % | |
13.8 % | -7.1 % | 0.6 % | 23.6 % | 27.9 % | 21.3 % | |
14.2 % | -1.3 % | -6.6 % | -0.8 % | 24.9 % | 19.1 % | |
-10.2 % | -19.8 % | 8.2 % | 13.7 % | 19.0 % | 13.8 % | |
-9.1 % | 0.9 % | -16.2 % | -12.6 % | 28.7 % | 25.3 % | |
18.5 % | -3.7 % | 2.1 % | -4.0 % | 24.6 % | 19.6 % | |
-4.1 % | -9.4 % | 3.6 % | -2.1 % | 32.1 % | 24.6 % | |
-17.3 % | -39.9 % | -1.2 % | 21.6 % | 22.2 % | 9.4 % | |
-7.3 % | -15.4 % | -9.1 % | 7.7 % | 22.8 % | 16.8 % | |
8.7 % | 5.3 % | -26.5 % | -2.6 % | 26.3 % | 26.5 % | |
15.4 % | 11.9 % | -8.2 % | 4.0 % | 30.0 % | 24.6 % | |
17.5 % | 13.3 % | 4.1 % | 10.5 % | 26.1 % | 20.6 % | |
-1.2 % | -18.1 % | -1.3 % | 4.3 % | 26.6 % | 20.4 % | |
-7.2 % | -14.6 % | -3.9 % | 10.1 % | 30.5 % | 25.9 % | |
-5.1 % | -18.1 % | -6.7 % | 21.6 % | 35.0 % | 25.1 % | |
19.9 % | 3.7 % | -2.1 % | 14.4 % | 27.4 % | 22.6 % | |
18.8 % | -12.0 % | -16.0 % | -14.5 % | 26.8 % | 24.7 % | |
-0.5 % | -11.5 % | -5.0 % | -10.5 % | 26.8 % | 23.6 % | |
13.8 % | 8.3 % | -3.1 % | -3.6 % | 28.0 % | 23.6 % | |
5.6 % | 4.0 % | 5.9 % | 10.6 % | 30.1 % | 21.5 % | |
3.4 % | -8.6 % | 0.1 % | 13.4 % | 29.7 % | 22.2 % | |
0.9 % | -11.6 % | 7.9 % | -3.9 % | 26.2 % | 20.3 % | |
26.3 % | 5.9 % | -12.2 % | 1.8 % | 26.2 % | 23.2 % | |
15.6 % | 1.0 % | -8.4 % | 32.6 % | 26.8 % | 27.7 % | |
-3.1 % | -16.8 % | 3.3 % | 27.7 % | 30.8 % | 19.6 % | |
2.2 % | -7.0 % | -13.1 % | -2.6 % | 26.0 % | 24.5 % | |
4.1 % | -15.1 % | -10.4 % | -18.0 % | 24.8 % | 26.4 % | |
8.5 % | 1.1 % | 1.3 % | 20.3 % | 32.6 % | 27.5 % | |
19.8 % | -15.4 % | -12.8 % | 20.5 % | 33.0 % | 30.4 % | |
15.3 % | -8.5 % | -24.6 % | 23.2 % | 21.5 % | 20.0 % | |
2.3 % | -26.2 % | 10.5 % | 2.7 % | 24.8 % | 12.9 % | |
12.3 % | 6.4 % | 3.1 % | 40.8 % | 32.3 % | 26.0 % | |
-3.2 % | -7.7 % | -12.7 % | 5.2 % | 21.8 % | 21.4 % | |
10.6 % | -16.1 % | -9.2 % | -1.8 % | 20.7 % | 13.8 % | |
-14.4 % | -17.2 % | -2.9 % | -13.1 % | 28.8 % | 20.2 % | |
4.9 % | 6.1 % | -3.5 % | 4.9 % | 14.4 % | 16.0 % | |
18.9 % | 6.8 % | 3.1 % | 24.1 % | 26.8 % | 26.5 % | |
16.0 % | -9.8 % | -4.4 % | 2.7 % | 35.6 % | 27.5 % | |
51.7 % | -13.3 % | -1.7 % | 42.4 % | 22.7 % | 28.0 % | |
13.5 % | 9.3 % | 0.2 % | 20.2 % | 27.4 % | 23.0 % | |
31.8 % | 0.0 % | 19.3 % | 18.4 % | 33.7 % | 22.9 % | |
16.1 % | -20.6 % | 12.9 % | 14.7 % | 24.1 % | 20.7 % | |
3.9 % | -8.3 % | -8.6 % | -32.2 % | 33.3 % | 27.2 % | |
7.3 % | 1.6 % | -18.4 % | -8.3 % | 13.5 % | 18.4 % | |
33.4 % | -16.1 % | -21.1 % | -31.1 % | 22.8 % | 19.3 % | |
14.9 % | -7.7 % | -9.6 % | 25.0 % | 23.8 % | 21.2 % |
*Table ordered by market size
About Zillow Group
Zillow Group, Inc. (Nasdaq: Z and ZG) is reimagining real estate to make home a reality for more and more people.
As the most visited real estate app and website in the United States, Zillow connects hundreds of millions of consumers with innovative technology, trusted agents and loan officers, and seamless digital solutions. With industry-leading tools and resources, Zillow supercharges real estate professionals so they can grow their businesses and deliver exceptional client experiences. For renters and housing providers, Zillow offers not only a robust marketplace but a set of end-to-end products and services to streamline applications, leases, payments and more.
Zillow's ecosystem spans the entire home journey — from dreaming and shopping to renting, buying, selling and financing.
Zillow Group's affiliates, subsidiaries and brands include Zillow®, Zillow Premier Agent®, Zillow Home Loans®, Zillow Rentals®, Zillow® New Construction, Trulia®, StreetEasy®, Out East®, HotPads®, Follow Up Boss®, ShowingTime®, dotloop® and Zillow® Closing.
All marks herein are owned by MFTB Holdco, Inc., a Zillow affiliate. Zillow Home Loans, LLC is an Equal Housing Lender, NMLS #10287 (www.nmlsconsumeraccess.org). © 2026 MFTB Holdco, Inc., a Zillow affiliate.
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SOURCE Zillow