Starter Homes Are Piling Up While Luxury Homes Fly Off the Market - Zillow Research
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Starter Homes Are Piling Up While Luxury Homes Fly Off the Market
Zillow data shows supply, price cuts and competition moving in opposite directions for starter and luxury homes.
Kara Ng
•<br>Jul 29 2026
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Key findings:
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 fell 5.4% in May, according to new Zillow data.
The starter home sales slowdown is especially stark when compared to a booming luxury sector. Luxury sales are up 6.2% year over year, as of May.
San Francisco is the starkest example. Luxury sales surged 21.6% year over year in May, while starter home sales fell 1.2%.
The U.S. housing market is splitting in two. Luxury homes are selling at a faster pace than a year ago, with shrinking supply and growing bidding wars. Starter homes are piling up on the market, sitting longer and drawing price cuts as buyers fail to show up. The pattern mirrors a broader economic divide, with stock market gains supporting demand at the high end while rising everyday costs weigh on potential starter-home buyers.
Starter homes are defined 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 $202,000, up 2.3% from a year ago. Luxury homes are those in the top 5% of home values in a given region. The typical luxury home is worth about $1.9 million, up 3.1% from a year ago.
Across nearly every metric, conditions are moving in opposite directions in these two segments. Inventory for starter homes rose 4.5% year over year in June, while luxury inventory fell 5.2%. Price cuts were more common on starter homes: 25% of starter homes cut their price in June, compared to 20.6% of luxury listings.
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 5.4% year over year in May, the latest month with complete data. Luxury sales grew 6.2% over the same period.
The divergence is sharpest in San Francisco. Luxury sales across the metro area surged 21.6% year over year in May, while luxury inventory fell sharply and fewer listings cut their price. Starter-home buyers are hanging back: sales slipped 1.2% year over year in May, while more than twice as many starter-home sellers cut their price in June (22.2%) to try to entice buyers off the sidelines than did luxury buyers (9.4%).
What’s holding buyers back
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. Hiring has slowed, inflation remains elevated and consumer sentiment has fallen to historic lows. In conditions like 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.
Metro Area*<br>Starter Home Inventory YoY (June 2026)<br>Luxury Inventory YoY (June 2026)<br>Starter Home Sales YoY (May 2026)<br>Luxury Sales YoY (May 2026)<br>Starter Home Price Cuts (June 2026)<br>Luxury Price Cuts (June 2026)
United States<br>4.5%<br>-5.2%<br>-5.4%<br>6.2%<br>25.0%<br>20.6%
New York, NY<br>6.7%<br>-15.9%<br>-22.3%<br>-14.2%<br>16.7%<br>11.6%
Los Angeles, CA<br>5.0%<br>-16.4%<br>-5.3%<br>10.6%<br>22.8%<br>18.7%
Chicago, IL<br>-4.1%<br>-7.3%<br>0.0%<br>24.9%<br>22.4%<br>18.7%
Dallas, TX<br>-2.9%<br>-9.0%<br>-2.8%<br>18.1%<br>33.0%<br>28.4%
Houston, TX<br>1.1%<br>-1.6%<br>-8.9%<br>8.7%<br>26.9%<br>22.9%
Washington, DC<br>13.8%<br>-7.1%<br>0.6%<br>23.6%<br>27.9%<br>21.3%
Philadelphia, PA<br>14.2%<br>-1.3%<br>-6.6%<br>-0.8%<br>24.9%<br>19.1%
Miami, FL<br>-10.2%<br>-19.8%<br>8.2%<br>13.7%<br>19.0%<br>13.8%
Atlanta, GA<br>-9.1%<br>0.9%<br>-16.2%<br>-12.6%<br>28.7%<br>25.3%
Boston, MA<br>18.5%<br>-3.7%<br>2.1%<br>-4.0%<br>24.6%<br>19.6%
Phoenix, AZ<br>-4.1%<br>-9.4%<br>3.6%<br>-2.1%<br>32.1%<br>24.6%
San Francisco, CA<br>-17.3%<br>-39.9%<br>-1.2%<br>21.6%<br>22.2%<br>9.4%
Riverside, CA<br>-7.3%<br>-15.4%<br>-9.1%<br>7.7%<br>22.8%<br>16.8%
Detroit, MI<br>8.7%<br>5.3%<br>-26.5%<br>-2.6%<br>26.3%<br>26.5%
Seattle, WA<br>15.4%<br>11.9%<br>-8.2%<br>4.0%<br>30.0%<br>24.6%
Minneapolis, MN<br>17.5%<br>13.3%<br>4.1%<br>10.5%<br>26.1%<br>20.6%
San Diego, CA<br>-1.2%<br>-18.1%<br>-1.3%<br>4.3%<br>26.6%<br>20.4%
Tampa,...