America’s housing market is splitting in two, and one group of buyers is getting left behind

Even though debate lingers about whether the K-shaped economy is over, the U.S. housing market is signaling it’s alive and well as activity remains starkly split along financial lines.

The increasing financial inequality between high- and low-income households, characteristic of a K-shaped economy, continues to be a major dynamic that’s shaping the U.S. housing market, according to a report released Wednesday by Realtor.com. While people shopping for entry-level homes have been priced out and stopped searching, those shopping for luxury real estate remain very much engaged, according to the Austin-based real estate site.

The report points to a sharp drop-off in buyer engagement for entry-level homes, even as the luxury market remains resilient. Traffic on listings of homes priced below $370,000 has fallen sharply—from 54.2% of online home-shopping traffic in 2021 to just 42.8% in 2026, according to Realtor.com. 

That double-digit decline in traffic to entry-level home listings coincides with a smaller share of listings in that price range, which shows that some potential homebuyers have been sidelined by affordability constraints, according to Jiayi Xu, a senior economist at Realtor.com. “The narrowing gap between listing share and view share at lower price points is being driven in large part by the retreat of price-sensitive shoppers.”

Meanwhile, the other end of the housing spectrum tells a very different story. Both the inventory of luxury homes on the market and buyer engagement have remained resilient thanks to a path to homeownership for well-capitalized buyers who remain active in the market, Xu notes in the report.

K-SHAPED ECONOMY DYNAMICS

Digging into the dynamics shaping the entry-level and highest-priced segments of the housing market offers the latest evidence that the K-shaped economy persists and can’t simply be willed away, even if it’s become a tiresome trope. Earlier this month, Treasury Secretary Scott Bessent told CNBC that he “got sick of hearing about this K-shaped economy” and declared that it was “over.”

While some economists have moved on, offering new descriptors for the pace of economic growth, many Americans continue to grapple with what feels like an uneven economy. In July, 95% of Americans reported that they believe the country is suffering from an affordability crisis fueled by the rising cost of basics like groceries and gas, according to a survey conducted by Harris Poll for The Guardian. 

‘NO LONGER SHOPPING AT ALL’

Affordability remains the dominant challenge that’s keeping many would-be homebuyers at bay. It’s the reason the average age of a first-time buyer is now 40 and why there’s been a big surge in people scouring foreclosure listings, among other factors.

While prices have come down somewhat—the nationwide median listing price of a home was $428,950 in July, down 2.4% from last year, according to Realtor.com figures—that alone hasn’t been enough to entice some buyers off the sidelines. In fact, even with fewer entry-level homes on the market, that’s not intensifying the competition for each listing as might be expected in a typical supply-constrained market, according to Xu.

“Instead, engagement with lower-priced homes has fallen to its lowest level since 2019,” Xu said. “The data suggest that many households who would once have competed for these homes are no longer actively shopping at all.”

HOW THE HOUSING MARKET IS CHANGING

In the span of less than a decade, the U.S. housing market has undergone some radical shifts—and this latest report underscores some reason for concern.

When Realtor.com last compared the gap between the median listing price of homes available for sale and the median price among those listings that shoppers were viewing in 2022, they found that entry-level demand far exceeded the available supply. Now, the researchers have found that the housing market has become much more stratified. 

While entry-level shopper demand has contracted alongside the share of lower-priced inventory, better-capitalized buyers continue to sustain activity at the top of the market—which may create the illusion of a market that’s more balanced than it really is.

“The market is more balanced on the surface, but that balance is not the same as broad-based health,” Xu said.