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It’s amazing how the same thing can feel totally different depending on your perspective.

Take housing: How can today’s market be so rewarding for those who own a home yet so punishing for those who don’t?

The short answer: The pandemic. Property values that shot up after COVID are still high, but mortgage rates that fell to record lows aren’t still low. That means that most Americans who bought or refinanced at ~3% rates in 2020 or 2021 have not only seen a surge in their property values but have built equity in their homes more quickly than higher rates allow. Meanwhile, many who don’t have a house to sell can’t afford to buy otherwise.

As Jessica Lautz, the deputy chief economist at the National Association of Realtors® (NAR) recently put it, the housing market has become “a tale of two cities." Property prices are 54% higher than at the start of the pandemic, so existing homeowners are making large down payments and all-cash offers while would-be buyers struggle just to break into the market, she said.

Data from NAR’s latest annual survey bears this out: Repeat buyers — older than they’ve ever been at a median age of 62 — are benefiting from the surge in home equity, with 30% paying for their next house entirely in cash this year. (That’s just shy of last year’s record high.)

At the same time, only 21% of buyers were buying for the first time this year, the smallest share ever (and down from at least 30% in the years prior to the pandemic and 40%+ before the Great Recession of 2007.) In fact, compared with 2019, roughly 1.8 million more renting households can’t afford a typically-priced home, according to a separate analysis by CBRE Research.

Remember, home equity is how much of a home you own, so it grows not only when the home becomes more valuable, but as you pay off your mortgage. And since over half of mortgaged homeowners in the U.S. are paying a rate below 4%, a smaller portion of their monthly payment goes toward interest, so they can build equity more quickly. Collectively, home equity in the U.S. is up 72% to $35.8 trillion over the past five years, according to Federal Reserve data.

In short, the options have expanded for property owners but shrunk for renters, making housing a classic example of what some are calling a "K-shaped” economy. On the upper arm of the "K” are higher-earning households who are more apt to own real estate or stocks that have surged in value during the AI market rally. On the lower arm are people whose purchasing power is being eroded by inflation and higher interest rates.

So what?

Today’s real estate market favors those who already have a seat at the table.

If you own a home, your equity is your superpower. You can use it to continue to grow your wealth, or if you decide to move, hopefully reduce (or maybe even avoid) a new mortgage. You can also borrow money against your home equity to pay for renovations or other expenses.

And if you don’t own a home, keep in mind that the traditional path to homeownership is shifting. The median age of this year’s first-time buyers reached a new record high of 40, which means many buyers may have a shorter timeline for building equity in a starter home.

On the bright side, once you’re a homeowner, you’ll have a new appreciation for rising property prices. And the market is slowly rebalancing: Buyers are starting to have more bargaining power on price, especially in the Southeast. Plus mortgage rates, while still over 6%, are lower than they’ve been most of the past year.

If you want to jump in sooner rather than later, consider tradeoffs like buying a smaller property, getting a fixer-upper, or moving to a less competitively-priced area. You may also want to explore asking relatives for help with the down payment.

Related Reading

Why Waiting for a Housing Crash Could Be Costing You Money (Investopedia)

A Potential ‘Second Spring’ for Homebuyers (SoFi)

I’m a Real Estate Agent: 5 Housing Market Trends To Prepare for in 2026 (GoBankingRates)

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