Housing’s New Divide Isn’t Just About Income. It’s About Who Already Has Wealth

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We spend a lot of time in mortgage lending talking about income.

How much does the borrower earn? What is the debt-to-income ratio? How much of a monthly payment can the household reasonably carry? What happens to purchasing power when the mortgage rate moves another quarter point?

Those are the right questions when somebody needs a mortgage to buy a home.

They are considerably less important when the person competing against that buyer has a large stock portfolio, substantial equity in another property, a six-figure bonus or enough cash to make the mortgage rate almost irrelevant.

That difference has always existed in housing. What caught my attention this week is how clearly it is beginning to show up in the numbers.

San Francisco may be the most extreme example.

Redfin reported Wednesday that the median home-sale price in the San Francisco metro reached nearly $1.6 million in July, up 6% from a year earlier. Seattle, another major technology market that has historically responded to many of the same economic forces, moved in the opposite direction. Its median sale price fell about 4% to roughly $809,000.

The differences go well beyond prices. San Francisco’s active inventory fell 18% from a year ago while Seattle’s increased 17%. Home sales increased about 9% in San Francisco and fell about 9% in Seattle.

Redfin attributes part of that divergence to the extraordinary concentration of artificial-intelligence investment, highly compensated workers and newly created wealth in the Bay Area. Seattle has a large technology workforce of its own, but it has also been dealing with layoffs and uncertainty among established technology employers.

I wouldn’t use two cities to declare a new national law of housing economics, and neither should anyone else.

But San Francisco gives us a particularly visible example of something I think our industry needs to understand better.

Income and wealth are not the same thing when people compete for housing.

Earlier this year, Redfin looked more closely at Bay Area ZIP codes and found that prices in the luxury segment increased an average of 13.4% from 2023 through 2025. The next-highest price tier increased 6.3%, while prices in the most affordable ZIP codes declined.

That pattern had not existed in the two years immediately before the launch of ChatGPT. During 2020 through 2022, price growth had been much more similar across the five price segments Redfin studied.

There is an important limitation here. Redfin’s research establishes a correlation; it does not prove that artificial intelligence caused those home-price changes. The company itself makes that distinction.

I think the numbers are interesting even without making the causal claim.

They show what can happen when a tremendous amount of purchasing power becomes concentrated among people competing for a relatively scarce group of homes.

We are seeing a version of the same divide nationally at the high end of the market.

During the three months ending May 31, the median luxury home sold for about $1.37 million, up 4.7% from a year earlier. Non-luxury prices increased 1.5%. Pending luxury sales were up 5.2%, compared with 3.6% for non-luxury homes.

Redfin defines luxury homes in that analysis as properties estimated to be in the top 5% of their metro area’s price range, so we should be careful about treating those buyers as representative of American homebuyers generally.

They aren’t.

That is precisely the point.

The affordability conversation in housing is overwhelmingly built around what a household earns and what it can finance. For most Americans, that is exactly how homebuying works. The buyer has an income, saves a down payment, qualifies for a mortgage and then discovers how much home the monthly payment will allow.

A move from a 6% mortgage rate to 7% matters enormously to that household.

Someone arriving with substantial existing wealth is playing a different game.

The distinction isn’t simply whether somebody is rich or isn’t rich. Wealth changes how a buyer can respond to the same market conditions.

A larger down payment reduces the amount that has to be financed. Existing home equity can become purchasing power for the next house. Liquid investments can provide flexibility when a buyer needs to compete. Stock compensation or a large bonus can dramatically alter what someone can put into a transaction without changing the salary that appears on a traditional affordability chart.

At the highest end, some buyers may need little financing at all.

This helps explain how we can have an affordability problem and rising prices at the same time without either statement being wrong.

Prices are established by the people who are actually able and willing to transact.

If a large number of would-be buyers are priced out but enough buyers with greater financial resources remain in the market, prices do not necessarily have to fall to a level the excluded households can afford.

That is an uncomfortable reality because housing is doing more than reflecting differences in wealth. Homeownership itself has historically been one of the primary ways American households build wealth.

The Federal Reserve’s latest household survey illustrates just how different access to ownership already is across income groups. Among adults with family income below $25,000, 24% owned their home in 2025. Ownership rose to 44% among those earning $25,000 to $49,999, 66% among households between $50,000 and $99,999, and 86% among adults with family income of at least $100,000.

Those numbers are strongly related to income, as we would expect.

But once someone owns a home, another financial dynamic begins. Principal can be paid down. The property may appreciate. Equity accumulates. That equity can later help fund another purchase, provide a larger down payment or become part of the household’s balance sheet.

Someone trying to enter homeownership for the first time doesn’t have that asset working for them.

That is why I think we need to broaden the way we talk about affordability.

Mortgage rates matter. Income matters. Home prices matter. Property taxes and insurance matter. Supply may matter more than almost anything else over the long term.

But two households with similar salaries can still arrive at the same listing with dramatically different purchasing power because their balance sheets look nothing alike.

For mortgage professionals, this is important because our business naturally trains us to think in terms of qualification. We determine whether a borrower has enough income, acceptable credit, sufficient assets and an appropriate debt load to support a particular mortgage.

Housing markets don’t operate according to underwriting guidelines.

The person bidding against our borrower may have equity from a home purchased fifteen years ago. They may have family assistance. They may own appreciated securities. They may receive compensation that doesn’t resemble a conventional paycheck. They may simply have enough cash that the interest rate causing our borrower to lose sleep barely affects their decision.

None of this means we should resent successful buyers or treat wealth creation as a housing problem. Building wealth is one of the reasons people aspire to own homes in the first place.

It does mean that solving affordability is more complicated than getting mortgage rates down another percentage point.

A lower rate helps the household that depends on financing. It can substantially improve that family’s monthly payment and purchasing power.

It can also increase the purchasing power of everyone else who uses financing and bring additional buyers back into the market. Without enough housing supply, more purchasing power can eventually find its way back into prices.

That is why I keep coming back to supply.

We can innovate around financing. We can create down-payment programs. We can improve credit access. We can find better ways to help people qualify.

All of those things can help individual families, and many are worth doing.

But if households with vastly different levels of accumulated wealth are competing for too few desirable homes, financing alone cannot solve the underlying problem.

San Francisco is an extreme market during an extraordinary technology boom. It should not be mistaken for a picture of the entire country.

It should, however, make us think.

For most of our industry, affordability is viewed through the eyes of the borrower trying to qualify for the house.

The housing market sees everyone who can make an offer.

Those are not always the same population anymore, and understanding the difference may be increasingly important to understanding where home prices go from here.