THERE'S A "K" IN "housing"?
Current economic/financial statistics tell diverse stories
- Stock market is reaching historic highs
- Inflation fell from a 6.9% annual rate in 2023 to a 2.7% low earlier this year but is trending up again – now 3.8%
- Inflation gains pushed residential real estate prices to a high in the last half of 2025 and they have stayed in that range in 2026
- For tenants, 2025/2026 residential rental rates rose slightly less than overall inflation
- From May 2025 to April 2026, Personal Income rose about 1% less than inflation
What do these numbers mean?
For Asset Building - Since 62% of Americans own stocks, the majority of Americans celebrated an average 17% gain in 2025. Americans with above-median wealth ($132K per person in 2024, according to UBS Wealth Report) hold liquid accounts along with restricted ones like 401ks or education funds, so these gains offer immediate access. Those in the two lower quartiles hold their investments in restricted accounts like 401ks or education funds so they saw these accounts grow.
For Household Cash Flow - Although there's wide divergence between who earns what, $84K was the US median income in 2024. Americans with above-median wealth can siphon cash from gains to stabilize their standard of living. Lower income Americans without available investment balances are scrambling to find day-to-day savings to close their inflation gap. Older homeowners can tap built up home equity to maintain budgets and keep their lifestyle but slowly reduce wealth; some "extra home costs" may be deferred.
For Housing – Regarding the 65% of Americans who own homes, their real estate equity growth did not keep pace with inflation. Meanwhile, for-sale inventory grows, so more experts call this a Buyer's market, particularly at the upper end. Mortgage rates moving up slow market potential. Homeowners scramble to cover extra costs (repairs and maintenance, insurance, property tax), estimated at $23,000. Rental rates are up moderately but so are mortgage rates, leaving tenants little motivation to check out a possible Buyer's market.
Where do the recent statistics land on the "K"?
CNBC defines the K-shaped economy as: "Americans are increasingly diverging in their spending, with wealthier shoppers flexing their purchasing power while lower-income customers start to pull back". From this point of view, the real estate market should be evaluated in tiers: wealthy buyers derive leverage from cash flow and may pressure prices of upper-market homes; middle income owners may benefit from this price pressure if they can accumulate the savings to take advantage; consumers at the bottom of the K struggle to stay within budget, particularly when inflation goes up, and judge affordability in terms of rent. More details track the K below:
A broader view of how the K influences consumer behavior is available in the Kearney 100 Consumer Stress Index.