It’s a tale of two markets — and it all comes down to the economy as the rich snap up luxury pads and the starter-home market goes cold.

Starter-home inventory was up 4.5% year-over-year in the US in May and price cuts climbed as economic headwinds like inflation and hiring slowdowns caused starter-home sales to drop 5.4% year-over-year, according to new data from listings giant Zillow. 

Meanwhile, luxury listings — defined as the top 5% of property values in a given region — slipped 5.2% while sales in this tier increased 6.2% in May, driven by stock market gains.

“Starter homebuyers today have more options, more negotiating power and sellers who are more willing to deal,” Kara Ng, senior economist at Zillow, said in a statement. “The challenge is that the same financial pressures making it harder to save for a down payment are also making it harder to take advantage of that opportunity.”

First-time buyers also saw more discounts in June, with a quarter of starter homes cutting prices compared to just 20.6% of luxury properties.

Nowhere was the dynamic more dramatic than in Cleveland, Ohio. While the rich scooped up high-end digs at a breakneck pace in the city — up 23.2% compared to May 2025 — starter-home sales plummeted at nearly the same amount at 24.6% year-over-year. Desperate C-Town homesellers slashed prices in June on 21.5% of starter homes and 20% of luxury homes.

Cleveland was followed by Memphis, Tennessee, with luxury home sales rocketing up 42.4% year-over-year compared to starter-home sales ticking down 1.7%.

Cincinnati, Ohio, was close behind, with luxury homes sales rocketing going up 32.6% while starter-home sales slid 8.4%.

Rounding out the top five were Nashville, then Indianapolis.

“What’s striking is that this divide is so large in comparatively affordable Midwest and Sun Belt markets like Memphis, Nashville, Cincinnati, Cleveland and Indianapolis, which suggests that first-time homebuyer affordability really isn’t just a coastal problem,” Ng told The Post. “In these markets and across the country, luxury home sales are surging while sales in the bottom price tier have fallen. These markets remain relatively affordable when compared to markets on the coasts, but starter home prices here have increased rapidly over the last few years, which has pushed homeownership further out of reach for many buyers.”

Washington, DC, was notable as its starter sales barely nudged up at 0.6%, whereas its luxury sales leaped 23.6%.

Bucking the trend, some markets saw starter homes outperform luxury sales.

In Sacramento, California, for example, luxury sales dipped 3.9%, but the city’s starter-home sales nudged up 7.9%. In San Jose, while luxury sales edged up 2.7%, starter-home sales climbed 10.5%.

“In these markets, starter-home sales are rising while luxury sales have fallen, but when we look at inventory, the number of available starter homes has increased from last year while available luxury homes are declining,” Ng said. “Affordability challenges in these Northeast and West Coast markets have historically been driven by lack of supply, so these recent inventory gains may have unlocked new opportunities for first-time homebuyers.”

Overall, US existing home sales took an unexpected hit in June as record-high home prices and sticky mortgage rates kept prospective buyers on the sidelines.