Topline

National home prices held nearly flat month over month in July, Redfin reported Tuesday, a resilience that hides a growing split in the housing market that has wealthy buyers propping up luxury demand—and everyday buyers priced out by mortgage rates that have stayed above 6%.

Key Facts

July's seasonally adjusted monthly price gain of 0.27% was barely changed from June's 0.28%, according to the Redfin Home Price Index, meaning home prices barely moved month to month.

But houses are still about 3% more expensive than they were a year ago despite mortgage rates remaining stuck in the mid-to-high 6% range through the summer.

Redfin's head of economics research, Chen Zhao, described a market "split in two," with everyday buyers constrained by affordability and wealthy buyers competing among themselves for desirable homes, adding that "upper-end strength is helping prop up prices even as the broader market cools."

Sellers outnumber buyers by hundreds of thousands nationally, which ordinarily would push prices lower, but house prices keep rising because the buyer pool that remains is disproportionately wealthy.

Luxury demand, particularly from high-income professionals and affluent retirees, has insulated the national price index from the weakness concentrated in mid-tier and entry-level segments, buyers for which can’t afford mortgages at the current rate.

In short, the new data shows national home-price indexes are being pulled upward by a narrow slice of the market, and potentially overstating the broad health of the housing market.

CONTRA

Texas markets tell the other side of that story. Cities that saw outsized pandemic-era migration and construction booms are now working through excess supply, producing the only sustained year-over-year price declines in the country. San Antonio fell about 2% and Fort Worth, Dallas and Austin each dropped about 1%, Redfin reported.

Key background

The Redfin Home Price Index tracks single-family home price changes over time, using a repeat-sales pricing method to measure how much prices change for the exact same properties between sales. The most recent index showed San Francisco leading across all major metros with a nearly 2% monthly price gain, followed by Oakland, California, at about 1%. Montgomery County, Pennsylvania, posted the steepest drop at about 1% month over month, according to Redfin’s analysis of the 49 most populous U.S. metros with sufficient data. On a year-over-year basis, San Francisco posted a 13% annual price gain, the highest among major metros.

WHAT TO WATCH FOR

What the Federal Reserve does next. Any interest rate cut that brings 30-year mortgage rates meaningfully below the mid-6% range could unlock pent-up demand from sidelined buyers and quickly accelerate price growth. The next interest rate decision will be announced Sept. 16.