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

The U.S. housing market is currently divided into two distinct segments, with one group of buyers struggling while the other remains robust, according to a recent report by Realtor.com. The financial disparity between high- and low-income households, a hallmark of a K-shaped economy, continues to play a significant role in shaping the market.

Targeting entry-level homes, shoppers have been priced out and have largely stopped their search efforts. In contrast, the luxury real estate market remains highly engaged. Realtor.com's Austin-based platform revealed a sharp decline in buyer engagement for entry-level homes, with traffic dropping from 54.2% of online home-shopping traffic in 2021 to just 42.8% in 2026.

This decline stems from a shrinking share of listings in that price range and the retreat of price-sensitive shoppers. Jiayi Xu, a senior economist at Realtor.com, attributes the narrowing gap between listing share and view share at lower price points to the withdrawal of these shoppers. While the luxury market continues to thrive, driven by a path to homeownership for well-capitalized buyers, the entry-level segment of the market is suffering.

The report highlights that affordability remains the primary challenge for many potential homebuyers, with the average age of a first-time buyer now 40 and an increase in foreclosure listers. Despite a slight decrease in the nationwide median listing price of homes, this has not been enough to re-engage the sidelines. In fact, the competition for each lower-priced listing has not increased as would be expected in a typical supply-constrained market.

The market has become more stratified in the past decade, with entry-level demand contracting alongside the share of lower-priced inventory. While activity at the top of the market continues, the market may not be as balanced as it appears, creating an illusion of broader health.