Luxury Home Demand Rises While Starter-Home Market Slows Across the U.S.

A new Zillow report reveals a widening split in the U.S. housing market: demand for high-end homes is accelerating, while the entry-level segment is losing momentum. The typical starter home, priced around $202,000, is up 2.3% from a year ago, yet its supply grew 4.5% in June and 25% of listings were reduced in price. Luxury homes, averaging $1.9 million, rose 3.1% and saw inventory fall 5.2%, with only about one-fifth of listings cut.

Senior economist Kara Ng said the current climate gives starter-home buyers more options and bargaining leverage, but inflation, weak consumer sentiment and a slowing job market hinder their ability to save for purchases. Wealthier buyers, buoyed by stock-market gains, are driving the luxury surge, especially in markets like San Francisco where luxury sales jumped 21.6% year over year. Meanwhile, starter-home sales in the same metro slipped 1.2% and faced more than double the price-cut rate of luxury homes. Cities such as Louisville, New Orleans, San Jose and Miami posted the strongest gains for entry-level sales, while Memphis, Nashville, Cincinnati, Austin and Birmingham led luxury growth.