'The housing market is the best expression of the "K-shaped economy" that we're in right now,' one expert says
While sales are still slow across much of the housing market, luxury homes are in high demand - with affluent buyers buoyed by stock-market gains.
Record-high home prices and rising mortgage rates are frustrating both buyers and sellers across much of the U.S. housing market - but there's a totally different story playing out at the upper end of the real-estate world.
Wealthy buyers who are immune to the challenges of today's high-interest-rate environment are driving brisk sales of luxury homes. And recent housing data - from pending home sales to the inventory of luxury homes - signal a growing chasm between the average American home buyers and their richer counterparts, who are mostly unfazed by affordability challenges.
"The housing market is the best expression of the 'K-shaped economy' that we're in right now," Mel Casey, a senior portfolio manager at FBB Capital Partners, told MarketWatch.
A K-shaped economy is one in which upper-income households sitting on stock-market gains fuel the bulk of consumer spending, while lower-income people pull back.
"The stock market's done great ... so that wealth effect is more pronounced in the upper-middle class and the higher end of the market," Casey noted.
Luxury homes are selling more briskly than average-priced homes. Over the span of a year, the share of homes for sale priced at $1 million dollars or more grew faster than the share of homes priced below $250,000, data from the National Association of Realtors showed. Between June 2025 and June 2026, sales of million-dollar homes grew 18%, while sales of homes under $250,000 were nearly flat.
Related: Home prices hit new all-time high, deepening affordability woes
Luxury home prices are appreciating more rapidly than more modestly priced homes, indicating strong demand from well-resourced buyers. Nonluxury home prices grew 1.5% over the course of a year, while luxury prices grew 4.7% as of May 31, according to a report from real-estate brokerage Redfin. The median sale price of a luxury home as defined by Redfin was about $1.37 million, versus $377,000 for nonluxury homes.
A luxury home, according to Redfin, is one in the top 5% of a metro area's price range; nonluxury homes are in the 35th to 65th percentile.
The average rate on a 30-year fixed-rate loan inched up this week to 6.49%, adding to the affordability crunch many prospective home buyers are feeling.
But in some cases, wealthy people are getting lower mortgage rates than the typical buyer. Based on the latest mortgage-application data from the Mortgage Bankers Association, the average rate on a 30-year jumbo loan was 8 basis points lower than a conventional loan's rate. Jumbo loans are mortgages that are larger than limits set by the Federal Housing Finance Agency. In most of the U.S., these loans are over $832,750, but can be over $1.24 million in high-cost areas.
The cost of a jumbo loan might be expected to be higher because Fannie Mae and Freddie Mac don't guarantee them, and they pose a higher risk to lenders. Yet because of their strong credit profile and considerable bank assets, some rich home buyers are getting cheaper loans - while average buyers are mired in a housing-affordability crisis, with rates close to a 10- month high.
In some cases, wealthy buyers can get a cheaper mortgage rate from a lender with whom they have an existing relationship.
"If you let a bank manage $1 million or $5 million [in] stocks, you can often get a 0.5% discount on the mortgage rate," Ken DeLeon, a luxury real-estate broker in San Francisco, told MarketWatch. "Many of my affluent clients are getting mortgages in the upper 4[% range] due to these relationships."
With stocks SPX regularly hitting new highs over the past year, wealthy buyers are also borrowing against their investment portfolios.
"One of the reasons that people can overbid [on a house] is because they can do things like borrow against stock. So if they own shares of [an AI company], they can borrow money against that," Mike Simonsen, chief economist at real-estate brokerage Compass $(COMP)$, told MarketWatch.
While the start of the Iran war in late February sent mortgage rates soaring and spooked prospective home buyers, putting a damper on the spring home-buying season, wealthier buyers have largely been insulated from external pressures and economic uncertainty.
More affluent buyers also have more for-sale inventory to choose from. With more buyers active in the upper end of the market, new listings of luxury homes rose 1% annually over the three months ending May 31, Redfin said, while new listings for nonluxury listings dropped by 0.4%.
Where luxury listings are being snapped up
San Francisco saw the biggest increase in pending luxury sales among the 50 most populous metro areas over the past year, Redfin found in its data. The pace of pending home sales indicates how strong or weak housing demand is, because it captures sellers accepting an offer and a home going under contract.
In San Francisco, pending sales of luxury homes rose nearly 46% year over year, Redfin said, attributing the increase to the boom in artificial intelligence.
Wealth among people in the AI industry has "exploded," leading to 44 homes being sold for at least $1 million over the asking price in June, said Simonsen, who is based in the San Francisco Bay Area. Some of these homes are rare finds, so that has fueled "really extreme" bidding wars with huge price tags, he noted.
"Within Silicon Valley, executives are amazed at how well their stocks are doing," said DeLeon, the San Francisco luxury broker. "These buyers are using their stock appreciation to sell and [offer] all cash to purchase homes." He said some of his clients have equity from working at AI companies like OpenAI, and have used it to make large luxury purchases.
To be sure, the sudden burst of demand for luxury homes has not been exclusive to Silicon Valley.
After San Francisco, Nashville has seen the second-biggest jump in pending luxury home sales. Music City "is attracting a lot of wealthy residents who move there for jobs and Tennessee's favorable tax environment," Redfin noted. Elsewhere, new listings of luxury homes rose the most year over year in the Detroit suburb of Warren, Mich., followed by Columbus, Ohio.
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July 09, 2026 15:30 ET (19:30 GMT)
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