This spring, the housing market is split between haves and have-nots. 

Demand for high-end homes has been booming, with sales at the $1 million-plus price point growing faster than any other part of the market. At the same time, sales at the lower end of the market — sub-$250,000 homes typically targeted by first-time homebuyers — have dropped in the past year. 

The divergence is another example of the K-shaped economy, in which high-income households are thriving and spending while lower- and middle-income households are pulling back as the cost of living rises. In the long run, such shifts can exacerbate the wealth gap as longtime homeowners reap home equity gains while first-time buyers struggle to enter the market at all. 

"That's really what you end up seeing in a lot of sectors of the economy — higher-income households are able to participate," said Selma Hepp, chief economist at Cotality, a property data firm. 

High earners have multiple advantages that help them ascend to the top of the housing market. They're more insulated from bruising inflation and more likely to have significant investments. Lately, they've been able to take advantage of fresh highs in equity markets.

"We are seeing a little more movement on the upper end," said Lawrence Yun, chief economist at the National Association of Realtors. "This could be a reflection of the fact that the stock market is essentially at record-high conditions."

The divide in sales trends

In April, home sales at the over-$1 million price point were up 9.3% from a year ago, according to National Association of Realtors data. Sales of homes in the $250,000 to $1 million range were slower, and sales at the $100,000 to $249,999 level dropped 1.3%. 

Many homeowners have found themselves at the top of the K by timing their purchases well. While the rapid rise in home prices since the pandemic is a challenge for first-time buyers, many current owners are sitting on sizable home equity positions, which can help them fund future purchases. 

"Move-up buyers have a distinct advantage because they've been riding this wave," said Marcus Auerbach, a real estate agent in the Milwaukee suburb of Whitefish Bay, Wis. He's seen buyers who put $35,000 down on a starter home five years ago walk away with $200,000 to $250,000 in equity by selling today. 

"For them, it has played out really well," he added. 

As a result, sales of the area's higher-end homes — those at about $800,000 and above —  have been strong this spring, and all-cash offers seem to be on the rise. Moderate- and entry-level-priced homes have been taking longer to sell. 

"The Milwaukee suburbs are not exactly dirt cheap anymore," he said.

Move-up buyers vs. first-timers

Similar dynamics are playing out in new construction, PulteGroup CEO Ryan Marshall said in an earnings call last month. The company, which is the nation's third-largest homebuilder, has seen strong demand for move-up homes and senior living, as well as spending on high-end extras such as premium lots. 

"However, on the lower leg of the K, first-time buyers continue to struggle with the challenges of stretched affordability and fear of job loss," Marshall said. 

Faith D., 26, who asked that her last name be withheld to protect her privacy, has been searching for her first home in the small eastern Tennessee town where she grew up. When she was in college, homeownership felt like a goal within reach after she graduated. But then prices skyrocketed during the pandemic. 

Today, little in her area is available for under $200,000. She went under contract on one home that looked promising but backed out after an inspection uncovered significant HVAC and sewer problems. Now on the hunt again, she's not sure she'll find anything suitable in her price range this year. 

"I've always been kind of on the sidelines looking in, trying to get enough money saved up to even consider getting a mortgage," Faith said. "Even though I'm at a point now where I could afford it, it's just insane to imagine paying that much to live in a town that doesn't even have a hospital." 

Meanwhile, higher-end listings, sometimes priced above $500,000, have been proliferating in her community. In an area where the median household income is under $50,000, those prices are out of reach for most locals. 

She and her real estate agent have puzzled over who could afford those homes. Their best guess? Well-heeled relocators and vacationers.

Claire Boston is a Senior Reporter for Yahoo Finance covering housing, mortgages, and home insurance.

I originally wrote and published this for Yahoo! Finance.

Property taxes have soared nationwide, fueling discontent among homeowners and prompting a flurry of efforts by states to rein in the hikes, or in the most extreme cases, phase out the taxes altogether.

But as state legislative sessions wind down, few proposals have become law. Florida ended its session without passing a bill that would wind down non-school taxes on many homes. A sweeping measure that would have ended property taxes in Georgia failed, leaving the state weighing a more limited bill to cap future property tax increases. And in Iowa, the state's House and Senate are considering two different tax-cutting bills, but have yet to find a compromise.

The political enthusiasm around cutting property taxes — more than a dozen states are considering it — but the difficulty in actually doing so reflects tough budget and economic realities. On average, some 70% of local revenues come from property taxes, meaning any efforts to cut them have serious implications for municipal budgets that pay for everything from public safety to park upkeep. And in the long-term, policies like capping property tax increases can make it more challenging for first-time homebuyers to enter the market.

"Good politics doesn't always make good policy," said Manish Bhatt, vice president of state tax policy at the Tax Foundation, a right-leaning think tank.

Growing bills

Property taxes have increased in response to skyrocketing home values around the country. While effective tax rates vary widely by state, homeowners in both high- and low-tax states have seen their bills balloon.

In New Jersey, which has the nation's highest effective property tax rate, as well as high home values, the median homeowner paid over $9,358 in property taxes in 2024, up more than 10% from $8,432 in 2019, according to Census Bureau data.

In Alabama, where property tax rates are among the lowest in the country and home prices are also more modest, the median tax bill was $890 in 2024, a 17% increase from $609 five years earlier.

The growing tax bills are a particular sting for low- and moderate-income homeowners, as well as those on fixed incomes, said Neva Butkus, a senior analyst at the left-leaning Institute on Taxation and Economic Policy.

"Property taxes have definitely been a hot topic in recent years because housing prices have increased significantly post-COVID," Butkus said. "Unlike many forms of taxation, property taxes are not necessarily connected to people's ability to pay them."

They're also a major component of what are often called the "hidden costs" of homeownership — a category that includes other fast-rising expenses like insurance and homeowners' association fees.

Winners and losers

Prior property tax revolts have shown how lowering the taxes can also have unintended long-term consequences for local housing markets.

Bruising inflation in the 1970s gave way to policies like California's Proposition 13, a 1978 law that caps annual tax increases and reassesses properties to current market value only when they change hands, or are first built. Nearly 50 years later, there's evidence that the law has helped inflate home values, discouraged longtime homeowners from moving, and made it harder for younger families to purchase homes in the state.

In a study last year, researchers found that raising California's 0.8% property tax to 2% — the same level as Texas's — would boost the state's overall homeownership rate by 6 percentage points, and its homeownership rate among the 25- to 44-year-old age group by 8 percentage points.

The somewhat counterintuitive outcome can be explained by the fact that higher property taxes act like a future mortgage payment. If California's taxes rose, home prices would likely fall by more than 11%, and lower prices would make it easier for first-time homebuyers to gain a foothold in the market, said Joshua Coven, an assistant professor of real estate at Baruch College's Zicklin School of Business, and one of the study's authors.

"If you have two homes that are exactly identical in every way, but one has higher property taxes than the other, you're going to pay less for that home," Coven said.

And if longtime homeowners are no longer paying below market-rate taxes, they're more likely to be willing to move, freeing up additional supply.

Despite the risks, some states are still pressing on. Florida Gov. Ron DeSantis has said he wants lawmakers to hold a special session on property taxes later this year. Iowa lawmakers have roughly a month to attempt to craft compromise legislation. And South Dakota's governor recently signed a pair of bills designed to boost sales tax revenues and use the proceeds to lower property taxes.

Claire Boston is a Senior Reporter for Yahoo Finance covering housing, mortgages, and home insurance.

I originally wrote and published this for Yahoo! Finance.

Longtime leasing agents say scoring a rental in San Francisco hasn't been this difficult since the dot-com bubble.

After a prolonged pandemic-driven slump, the city's rental market came roaring back this year. Apartment rents have soared by double-digit percentages since last year, the fastest rate among any major city. Competition is fierce: Open houses that attract 30 or more prospective renters in a single afternoon are common, and listed rents might as well be a starting point for negotiations.

"It's nearly impossible to find an apartment for the average renter," said Corey Eckert, executive vice president of leasing at Structure Properties.

The average one-bedroom apartment in the city now rents for about $3,300, according to rental platform Zumper, while two-bedrooms typically go for around $4,600. A confluence of factors, including return-to-office mandates, the arms race for AI talent, and the city's persistent, severe housing shortage, has fueled the frenzy.

Members of Eckert's leasing team are scouring sought-after neighborhoods in search of under-the-radar landlords with vacant units. And lately, apartment hunters have been beating them to their own open houses, he said. Arriving 15 minutes before one is set to begin may mean being greeted by an eight-person-deep line at the door.

A long climb back

Although rents are surging citywide, they're only just now matching or exceeding pre-pandemic levels.

Many big cities saw rents drop in 2020 and 2021 as city dwellers with remote jobs left in search of more space, but the decline in San Francisco was among the steepest in the country, and its recovery has taken longer. Apartment List pegs the average rent in the city at about $3,000 today, still a bit below the July 2019 average of $3,234.

Dan Lopez, a senior adviser at Pacific West CRE who specializes in apartment building sales and management, said he first started noticing an uptick in rental demand late last year, which he attributes to the post-Covid recovery, return-to-office trends, and excitement about the city's new mayor, Daniel Lurie. Lurie took office in January after campaigning on promises to address the interlocking problems of homelessness, mental health, and drugs, and to build more affordable housing.

"I think that's been the kicker in terms of the rental demand," said Lopez, a lifelong San Franciscan. "People are actually wanting to be here, and the narrative of the city is really changing."

AI is also a contributing factor. Workers in the industry have made up about 30% of Structure's recent applicants, Eckert said. But it's hardly the only well-paying option in the city. He also sees a number of applications from healthcare workers, thanks to the highly ranked UCSF Health System. San Francisco is also home to other large tech companies like Salesforce, Uber, and Airbnb.

Supply crunch

As those workers compete for units, they're running up against a severe supply shortage. As of July, San Francisco's apartment vacancy rate was under 4%, according to Apartment List data. Among major cities, only New York's is lower. The nationwide average is 7%.

It's long been difficult to build in San Francisco due to strict zoning laws, high costs, and a slow permitting process. New construction nosedived during the pandemic and has yet to bounce back. Last year, the city netted just 1,600 new units, far below its 10-year average of 3,620 homes. It's fallen behind the pace of a state mandate to build 82,000 homes by 2031.

"It is clear that San Francisco, the broader Bay Area, and a lot of California has just not built and expanded its rental inventory the way a lot of other parts of the country have," said Rob Warnock, a senior research associate at Apartment List.

Jason MacDonald and his wife began searching for an apartment in San Francisco this spring after she got a new job in the city. The process, he said, was "a grind." The couple toured around 50 apartments and applied for more than 15. Though they both have well-paying technology jobs, they found themselves losing out to couples making four times as much who were willing to pay well over the asking rent.

As their hunt for a two-bedroom unit dragged on, they winnowed their list of must-haves and expanded their search radius.

"We were initially 'laundry has to be in unit' people — that went out the window pretty fast," said MacDonald, 30. So did their hopes of having a designated parking spot. And after their first few rejections, they stopped bothering to apply for units if an open house was particularly packed.

"When you're one of 50 people at the open house showing, it just doesn't even feel like it's worth it," he said.

After a months-long search, they signed a lease this week. Apart from quickly reaching out to ensure they were the first to see the unit, MacDonald isn't sure exactly why they won this time.

"We got a call from the listing agent, and he said it was vibes," MacDonald said. "The owners didn't care too much. They just wanted someone who wasn't going to be fussy. We were lucky enough to lock one in, finally."

'People are just desperate'

In previous hot markets, San Francisco tenants might offer to pay a year of rent up front in an effort to win an apartment, said Amanda Jones, an agent at Compass and a 21-year veteran of the city's real estate scene. But after offers of "advance rent" were banned, many apartment hunters now resort to bidding up rents. She recently had a luxury unit listed at $6,400 a month. One prospective tenant offered to pay $7,000 on the spot.

"People are just desperate to get into housing," Jones said. "I think for people that really, really want community and want to be in certain neighborhoods, they're willing to pay the price."

The city's well-heeled renters often gravitate toward residential neighborhoods like Noe Valley and Pacific Heights, which feature San Francisco's classic housing stock — pastel-colored, bay-windowed Victorian and Edwardian homes, agents told Yahoo Finance. Younger tenants frequently concentrate their searches in neighborhoods well-connected to public transportation and not far from the sprawling South of Market district, where many of the city's top employers are concentrated.

Around the city, Jones is increasingly finding that "people won't take no for an answer," even if they've been told applications have come in ahead of theirs. She's seen would-be tenants beg to be considered over others ahead of them in line, promising to pay more in rent and drop everything to sign a lease on the spot.

"They're getting very savvy about what landlords want," Jones said.

For those still on the hunt and hoping for some price relief, Warnock, of Apartment List, doesn't see many signs to be optimistic. Barring extreme scenarios like another pandemic or a total AI industry bust, he sees few signs that the city's current housing supply can keep up with the demand.

"The money flowing into the economy here is growing," Warnock said. "And as that continues, we know that there will not be the new apartment inventory to absorb the money and the demand that comes from that."

Claire Boston is a Senior Reporter for Yahoo Finance covering housing, mortgages, and home insurance.

I originally wrote and published this for Yahoo! Finance.