Luxury Homes Are Still Moving; Entry-Level Buyers Are Getting Crushed; Why San Francisco Is Becoming Two Different Housing Markets
October 19, 2026 | Michael Belfor
The housing market is not simply “good” or “bad” right now.
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It is splitting.
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At the lower end of the market, buyers are struggling with affordability.
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At the upper end, cash buyers and high-equity buyers are still moving.
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A new Wall Street Journal analysis found that luxury home prices are outperforming lower-priced homes in most major metro areas.
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In 33 of the 50 largest U.S. metros, luxury prices are either rising faster or falling more slowly than entry-level prices. San Francisco is one of the markets showing that divide. The Wall Street Journal
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That tells us something important:
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There is not one housing market.
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There are several.
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I. HIGHER RATES DO NOT HIT EVERY BUYER THE SAME WAY
A buyer putting 5% down feels a 7% mortgage rate very differently than a buyer putting 50% down.
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A cash buyer does not care about mortgage rates at all.
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That sounds obvious.
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But it explains a lot of what we are seeing.
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Higher rates are hitting first-time and entry-level buyers the hardest because they are the most payment-sensitive.
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They usually have less equity.
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Less cash.
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Smaller reserves.
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And fewer financing options.
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Meanwhile, wealthier buyers may be using proceeds from another home, stock compensation, business income, or accumulated assets.
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That means they can keep buying even when rates are painful.
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II. SAN FRANCISCO IS A PERFECT EXAMPLE
San Francisco is especially unusual because the high end is supported by people with enormous amounts of liquidity.
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That can come from technology compensation.
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AI-company wealth.
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Equity from another Bay Area property.
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Or simply a buyer who does not need much financing.
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So while a first-time buyer may be calculating whether the monthly payment works at all, another buyer may be deciding whether to finance 30% of the purchase price or pay cash.
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Those are not remotely the same market.
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And that is why national headlines can be misleading.
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A story saying “buyers have more leverage” can be true nationally and still be completely wrong for a specific $3 million home in San Francisco.
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III. THE LOWER END IS WHERE AFFORDABILITY IS BREAKING
The affordability problem is not simply that mortgage rates are above 7%.
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It is that home prices are still extremely high relative to incomes.
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That is why today’s 7% mortgage rate feels so much worse than 7% did decades ago. Recent reporting noted that the bigger difference today is the price-to-income ratio, not simply the mortgage rate itself. The Washington Post
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The house costs far more relative to what the average family earns.
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That is especially painful for buyers who are trying to enter the market for the first time.
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They may be dealing with:
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A higher payment.
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A larger down payment.
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Higher property taxes.
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Higher insurance.
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HOA dues.
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And less room in the monthly budget.
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That combination can force buyers to lower their purchase price or leave the market entirely.
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IV. THIS IS WHY “THE MARKET” IS THE WRONG QUESTION
I get asked all the time:
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“How is the market?”
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My answer is usually:
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“Which market?”
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A $700,000 condo in Riverside is not moving the same way as a $3 million single-family home in San Francisco.
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A first-time buyer is not competing the same way as an all-cash buyer.
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A property sitting for 60 days is not the same as a turnkey home getting 10 offers.
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A luxury buyer with significant assets may barely care about the rate.
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A buyer stretching to qualify may care about every eighth of a percent.
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So when someone asks whether it is a buyer’s market or a seller’s market, I want to know:
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What price point?
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What neighborhood?
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What property type?
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What financing?
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And how many real competitors are there?
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That is the market that matters.
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V. FINANCING STRATEGY HAS TO MATCH THE BUYER
This is where mortgage strategy becomes more important.
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For one buyer, the goal may be:
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Keep the down payment as low as practical.
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For another:
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Preserve liquidity.
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For another:
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Avoid selling stock.
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For another:
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Use a jumbo loan temporarily and pay it down later.
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For another:
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Buy before selling the existing home.
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And for another:
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Pay cash and refinance later if it makes sense.
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There is no universal “best” loan.
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The financing has to fit the buyer’s actual balance sheet.
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That is especially true in high-cost California markets where a borrower can be extremely wealthy and still want to finance strategically.
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VI. THE BIG OPPORTUNITY MAY BE IN THE MIDDLE
The most interesting part of this split market may be the properties that are not truly entry-level and not truly luxury.
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That middle can sometimes get overlooked.
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A buyer who is well-qualified but not competing against cash-heavy luxury buyers may find more negotiating room.
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A seller whose property does not fit the hottest segment may be more open to credits or price reductions.
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That is where preparation matters.
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If the buyer is already fully approved and understands the payment, they can move quickly when the right property shows weakness.
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THE BOTTOM LINE
The housing market is dividing.
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Entry-level buyers are getting hit hardest by affordability.
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Luxury buyers are still active because many are less dependent on mortgage financing. The Wall Street Journal
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And in markets like San Francisco, that difference can be dramatic.
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So do not make a decision based on a national housing headline.
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Ask:
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Who is actually buying this type of home?
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How dependent are those buyers on financing?
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How much competition is there at this price point?
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And what financing structure gives me the strongest position?
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Because the answer to “How is the housing market?” depends entirely on which housing market you are talking about.
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ABOUT MICHAEL BELFOR
Michael Belfor is a Branch Manager and Loan Originator with American Pacific Mortgage, bringing approximately 24 years of mortgage lending experience.
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An APM President's Club and Top 1% originator since 2017, Michael helps homebuyers, homeowners, and real estate investors navigate conventional, jumbo, FHA, VA, Non-QM, DSCR, TIC, condo, construction and other mortgage financing solutions.
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Michael Belfor | American Pacific Mortgage
Direct: 415-233-4235 | Orange County: 949-577-6449
Website: www.mikebelfor.com
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San Francisco Housing Is Splitting Into Two Markets — Luxury vs Entry-Level
Luxury homes are outperforming entry-level properties in many major markets, including San Francisco. Learn why cash buyers, affordability and financing strategy are creating two very different housing markets.
San Francisco housing market 2026, luxury homes San Francisco, Bay Area jumbo mortgage, cash buyers San Francisco, California housing affordability, jumbo financing
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