Million-Dollar Sales Surge While Starter Homes Stall: What the US Housing Split Means for Buyers

US real estate is splitting into winners and losers

The US real estate market is cleaving into distinct winners and losers this spring, and that split is not subtle. High-end homes are seeing a sharp rise in demand, while the lower-priced segment that first-time buyers usually target is cooling. Our analysis shows this is a classic example of a K-shaped recovery in housing: households with substantial assets and investment gains are moving up, while those who rely on wages are being squeezed out.

Quick hook

• Sales of homes priced above $1 million were up 9.3% year-on-year in April, according to the National Association of Realtors (NAR).
• Sales in the $100,000–$249,999 range dropped 1.3%, and the middle tier of $250,000–$1 million posted weaker growth.

Those two numbers frame the story: more activity and cash at the top, slower sales and longer listings at the bottom.

A K-shaped housing market: what is happening and why it matters

A K-shaped economy describes divergent outcomes across income groups. In housing, the K shows as rising sales and prices at the high end and stagnation or decline at the low end. The drivers are straightforward and visible in the market right now.

• Higher-income households are less affected by inflation and are more likely to hold investments that have recovered or exceeded pre-pandemic values. As NAR chief economist Lawrence Yun said, the stock market has been at “record-high conditions,” which helps buyers fund pricier purchases.
• Existing homeowners who bought during the pandemic or earlier have large amounts of home equity and can use it to move up. A Milwaukee-area agent told us buyers who put $35,000 down five years ago now often have $200,000–$250,000 in equity when they sell.
• First-time buyers face both higher prices and costly mortgage financing, making entry difficult.

This is not just an academic observation. The split widens wealth inequality because homeowners who have benefited from house-price gains convert that equity into more valuable properties, leaving renters and new entrants farther behind.

Data snapshot: which segments are expanding and which are contracting

The most recent NAR data provide a clear snapshot of the split.

• Over-$1 million segment: +9.3% year-on-year sales (April) — the fastest growth by price tier.
• $250,000–$1 million segment: slower sales growth — solid in places but not leading the country.
• $100,000–$249,999 segment: -1.3% year-on-year sales (April) — the only major bracket in decline.

Other market signals line up with these trends:

• Increased frequency of all-cash offers in higher-price neighborhoods.
• Longer days on market for starter and moderate-priced listings.

Taken together, the data show a housing market where liquidity and purchasing power are concentrating toward the top.

Why high-end demand is surging

High-end buyers have a mix of liquidity, portfolio gains, and optionality that lower-income buyers lack. I see four practical reasons high-end homes are stronger now:

1. Equity extraction and move-up power: Many owners who bought earlier have large equity cushions that let them make substantial downpayments or buy without financing.
2. Portfolio gains: Rising stock prices give higher-income households the cash to upgrade or buy second homes.
3. Cash offers: Cash removes financing risk and speeds closings, an advantage in competitive luxury markets.
4. Preference shifts: Some higher-income buyers are re-allocating savings into real assets, including homes.

Agents on the ground confirm the trend. Marcus Auerbach, a real estate agent in Whitefish Bay, Wisconsin, said move-up buyers have “a distinct advantage” because they have been riding the price wave and can now afford homes around the $800,000+ level in his area.

For investors, the high-end bounce can mean opportunities in markets where cash buyers are concentrated and where luxury inventory is still limited. But investors must price for slower appreciation and higher holding costs in luxury segments.

Why the entry-level segment is cooling

The lower-priced tiers are where younger and first-time buyers live, and they are where constraints are most acute:

• Elevated asking prices after the pandemic have left starter homes less affordable.
• Mortgage costs remain elevated compared to pre-pandemic lows, which increases monthly payments even if rates are somewhat lower than their peaks.
• Sellers who might have moved from starter homes to mid-priced properties often stay put because they like their locked-in low mortgage rates, reducing supply targeted to first-time buyers.

These forces reduce transaction volume in the $100,000–$249,999 bracket and place downward pressure on mobility at the bottom of the housing ladder.

What this means for buyers and investors: practical guidance

I’ll be blunt: the market is asymmetrical right now. Strategies differ sharply depending on whether you are a first-time buyer, a move-up buyer, or an investor.

For first-time buyers

• Re-assess affordability with conservative mortgage-rate assumptions and include taxes and insurance in monthly cost estimates.
• Consider programs that lower upfront costs such as low-down-payment mortgages (FHA, conventional with private mortgage insurance, and local down-payment assistance where available).
• Look beyond traditional suburbs where starter housing is scarce; more distant suburbs or smaller cities may offer more realistic entry points.
• Budget for renovation; buying a cheaper home you can improve may be less costly than competing in the overpriced starter market.

For move-up buyers and owners with equity

• Use home equity judiciously. Equity is a powerful lever for buying up but increases exposure to higher-priced housing.
• All-cash purchases remove financing risk but reduce liquidity; consider blended approaches (cash downpayment plus mortgage).
• If selling, time listings to local demand patterns. Luxury buyers show more activity this spring, so price and presentation matter.

For investors

• High-end cash activity favors buyers who can move quickly; consider partnerships if you lack that liquidity.
• Rental demand may strengthen in the lower-priced tier because first-time buyers delay purchases. Well-priced starter rentals can deliver steady cash flow.
• Expect greater competition for luxury repositioning and short-term flips; margins squeeze if acquisition prices are bid up by cash buyers.

Regional carve-outs and on-the-ground evidence

National trends matter, but local markets drive outcomes. The Milwaukee suburb example is informative and repeatable in other regions where starter homes appreciated sharply over the last five years. Agents report:

• Sellers of older starter homes reporting $200,000–$250,000 in equity in some suburbs.
• Increased sale velocity for homes priced above local upper-middle thresholds.
• Longer marketing times for sub-$250,000 listings.

Markets with high concentrations of tech wealth or significant post-pandemic in-migration have shown the most pronounced high-end activity. Conversely, markets where wage growth lags and inventory of affordable homes is constrained show the biggest stress at the entry level.

Policy, affordability and the long-term picture

This split raises a policy question: will housing become a vehicle for accelerating wealth inequality?