Two Different Housing Markets, One Zip Code: What the Luxury and Starter Home Divide Means for You

I have been watching an interesting split happen in the housing market this summer, and it is worth talking about because it affects buyers very differently depending on where they are shopping.

The Luxury Market Is Riding the Stock Market's Wave

At the top of the market, homes are moving fast. Nationally, luxury home sales, that is homes in the top 5% of value for their area, are up 6.2% year over year as of May. Inventory in that segment actually shrank 5.2% compared to last year, and sellers rarely need to cut their price. Only about 1 in 5 luxury listings did in June.

San Francisco is the clearest example of this. Luxury sales there jumped 21.6% year over year in May. That is a huge swing, and it lines up with what I have been seeing and writing about locally this year: stock market gains, much of it tied to AI wealth in the Bay Area, are putting real cash in the hands of buyers who are ready to compete for the best homes. When a tech employee's stock options vest or a company has a strong year, that money often finds its way straight into a Danville, Blackhawk, or Lafayette listing. Bidding wars are back in that tier, and sellers know it.

Meanwhile, Starter Homes Are Sitting

The story looks almost opposite for entry-level buyers. Starter homes, defined as those in the 5th to 35th percentile of value for their area, saw inventory rise 4.5% year over year in June. A full quarter of starter listings cut their price that month. And even with more homes to choose from and friendlier pricing, sales in this tier fell 5.4% year over year nationally, and 1.2% in San Francisco specifically.

That tells me buyers who would normally be shopping at the entry level are hesitant right now, likely because of the everyday cost pressures many families are feeling, even while the homes themselves have gotten a little more attainable.

Where First-Time Buyers Can Still Find a Deal in the Bay Area

This softer starter home market is showing up in some very livable corners of my territory. A few places worth a look:

• Concord and Martinez in Contra Costa County remain some of the more approachable entry points in the East Bay, with a mix of older single-family homes and townhomes.
• Pinole and Hercules offer relatively affordable pricing along the I-80 corridor, with easy access to the Bay Area job market via BART and the Richmond Bridge.
• Livermore in Alameda County still gives buyers more house for the money than Pleasanton or Dublin, with a small-town downtown feel.
• Alum Rock, Berryessa, and Blossom Valley in San Jose remain some of the more affordable neighborhoods in Santa Clara County, especially for young families looking at starter homes near good elementary and middle schools.

If you have been priced out of Walnut Creek or Los Gatos, these are the kinds of neighborhoods where the current inventory bump and softer pricing are actually working in your favor.

Help Is Available for First-Time Buyers

There is real financial assistance out there right now to make that first purchase easier:

• CalHFA MyHome Assistance Program. A deferred, zero interest second loan of up to 3.5% of your purchase price to help with your down payment or closing costs. You do not repay it until you sell, refinance, or move.
• CalHFA ZIP Program. Covers 2 to 3% of your closing costs at zero interest, often paired with MyHome.
• Mortgage Credit Certificate (MCC). A federal tax credit worth up to $2,000 a year for the life of your loan, rather than a one-time deduction.
• City and county programs. San Francisco, Santa Clara County, and Alameda County all run their own down payment assistance for qualifying first-time buyers, on top of the state programs.

If any of these neighborhoods or programs catch your eye, I am happy to talk through what you would actually qualify for.