Mark Zandi<\/strong>, chief economist at Moody\u2019s Analytics. <\/p>\nThose two states\u2014alongside other affluent metros in the Northeast\u2014anchor the upper curve of the housing market, where job centers in finance, biotech, and health care continue to generate steady demand, according to a recent report from Cotality.<\/p>\n
Data from the Realtor.com Luxury Housing Report reinforces that strength. Even as the national luxury benchmark dipped 0.5% in September to $1.24 million, top-tier listings are taking only slightly longer to sell\u201479 days versus 62<\/strong> for median-priced luxury homes. That gap has held steady for nearly a decade, underlining the fact that even when the broader market cools, the upper tier slows without stalling.<\/p>\nMarkets like Santa Barbara, CA, now the nation\u2019s priciest luxury metro, and Bridgeport-Stamford, CT, continue to command multimillion-dollar thresholds, supported by buyers who can pay in cash. Nearly half of all homes priced above $2 million sold without financing this year\u2014proof that liquidity itself has become the defining edge of the modern housing cycle.<\/p>\n
<\/span>Where risk rolls downhill<\/span><\/h2>\nThat stands in stark contrast to households on the lower half of the K-shape. Here, affordability has eroded and uncertainty underpins every decision.<\/p>\n
\u201cMuch like the K-shaped trend seen in overall consumer spending\u2014driven largely by higher-income groups\u2014lower-income potential homebuyers are facing challenges due to an uncertain job market, sluggish wage growth, and worsening financial conditions,\u201d says Dr. Selma Hepp<\/strong>, chief economist at Cotality.<\/p>\nThe firm\u2019s latest data show that 1 in 5 U.S. metros is now posting annual home-price declines\u2014the largest share since mid-2023\u2014while serious mortgage delinquencies are rising in several high-cost states, especially Florida, where once-booming markets like Tampa and Orlando are cooling fastest.<\/p>\n
They\u2019re concerning numbers made all the more confounding by the fact that lower home prices haven\u2019t translated into a buying boom from those who have been on the sidelines for years.<\/p>\n
Part of that discontent may stem from the fact that homebuying and homeownership costs are outpacing incomes. Escrow expenses are up 45% over the last five years, and real mortgage payments have jumped 72%, even after accounting for recent rate relief.\u00a0<\/p>\n
And even with cooling prices in some areas, three-quarters of the nation\u2019s top 100 markets remain overvalued, according to Cotality\u2019s Home Price Index.<\/p>\n
The power of those pressures combined have priced out first-time and lower-income buyers despite a modest uptick in supply and recent softness in mortgage rates. So even as listings rise, the entry ramp remains blocked, and while the housing market looks like it\u2019s opening a door from afar, it remains locked.<\/p>\n
<\/span>The diminishing middle<\/span><\/h2>\nPart of the danger of a K-shaped economy is how it hollows out the very group that once held everything together: middle-income earners. <\/p>\n
Once the backbone of both consumer demand and housing stability, middle-income earners have been shrinking for more than half a century. In 1971, about 61% of U.S. adults lived in middle-class households, according to the Pew Research Center. By 2021, that share had fallen to 50%, while both lower- and upper-income tiers grew.<\/p>\n
Now, that stratification has created undue reliance on high-income earners to prop up the economy overall and keep spending.<\/p>\n
\u201cFor those in the bottom 80% of the income distribution, spending has simply kept pace with inflation,\u201d Zandi shared in a recent X post. \u201cThe 20% that make more have done much better.\u201d<\/p>\n
Just look to Manhattan for evidence of how this pattern is repeating in the housing market. Cash purchases made up a record 69% of all home sales in the second quarter of 2025, according to Miller Samuel\u2019s quarterly report for Douglas Elliman. At the same time, deals that included financing contingencies\u2014where buyers can walk away if they can\u2019t secure a loan\u2014hit their second-highest level in a decade.<\/p>\n
The result is a split screen: a market still moving powered by players at the top, and slowing everywhere else.<\/p>\n
<\/span>The stakes: What happens if the top stops spending<\/span><\/h2>\nThe U.S. housing market\u2014and much of the broader economy\u2014now rests on a fragile foundation: the continued confidence of the wealthy.<\/p>\n
\u201cThe U.S. economy is being largely powered by the well-to-do,\u201d says Zandi. \u201cAs long as they keep spending, the economy should avoid recession. But if they turn more cautious, the economy has a big problem.\u201d<\/p>\n
That’s because if demand at the top softens, there\u2019s little cushion beneath it. The middle class, already squeezed by stagnant wages and rising costs, can\u2019t easily step in to fill the gap.<\/p>\n
In a balanced economy, housing reflects broad-based confidence. In a K-shaped one, it mirrors concentration. And if the top curve bends, the rest may have nowhere to land. For never was a story of more woe than this, of buyers high and low.<\/p>\n","protected":false},"excerpt":{"rendered":"
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