Luxury home sales surge as starter market stalls across the US
The national index posted a 1.1 percent annual gain in May, its first reading above 1 percent in 2026. The 10-city composite rose 2.4 percent year over year, and the 20-city composite advanced 1.6 percent. Month over month, prices nationally grew 0.6 percent – positive, but below the historical May average of 1.0 percent recorded during the pre-pandemic period of 2015 to 2019, according to Cotality’s analysis.
“The May data reveals a market with potential for a seasonal rebound,” said Thom Malone, principal economist at Cotality. “While May’s month-over-month increase of 0.6% is below the pre-pandemic norm, the uptick in the annual appreciation rate suggests that while affordability issues are keeping demand weak, low inventory levels are creating a floor for prices on the supply side.”
Wealth effect drives luxury demand
The explanation for the luxury surge is straightforward: stock market gains over the past year have materially improved the purchasing power of high-income households, and that wealth effect is flowing directly into premium real estate.
Luxury home inventory fell 5.2 percent nationally in June 2026, according to Zillow, even as luxury sales accelerated. Price cut rates on luxury listings stood at 20.6 percent in June, elevated by historic standards, but well below the 25.0 percent rate recorded for starter-tier homes.
San Francisco offers the most dramatic illustration of the divide. Luxury home sales in the Bay Area surged 21.6 percent year over year in May 2026, per Zillow data, while luxury inventory fell sharply and fewer sellers were cutting prices – just 9.4 percent of luxury listings, compared with 22.2 percent of starter home listings in the same metro. Starter home sales, meanwhile, slipped 1.2 percent year over year. The city’s upper market is functioning almost independently of its entry-level segment.
