The luxury housing market is cracking — and tech-heavy cities are getting hit hardest

While prices remain near record highs — with the median sale hitting $1.35 million, up nearly 7% since 2024 — beneath the surface, demand is cracking. The 10% drop in sales makes for the steepest decline since 2023 and the lowest April level in over a decade.

Rising prices and rates on jumbo mortgages stubbornly stuck near five-year highs help to explain the sales decline. But this isn’t just a housing story. It’s a broader signal. For years, wealthy Americans bought the dip and shrugged off volatility. Now, they’re blinking.

Rising economic anxiety, even among the 5%

Evidence from the housing market and beyond suggests that the top 5% of U.S. households are growing skittish. Consider the location of the steepest declines — San Francisco, an extraordinarily tech-heavy market, but with its own finance-sector presence, too.

Since 2022, nearly 500,000 tech workers have been laid off as major tech companies and smaller players have quietly offshored high-paying roles, from engineers to product managers. Even Walmart $WMT (WMT) is trimming corporate headcount — not out of desperation, but arguably because it can.

The Wall Street Journal (NWSA) recently captured the new mood in boardrooms: “Everybody’s replaceable.” Such attitudes are likely to particularly affect white-collar workers in the wealthiest 5% who rely on their corporate salaries for the bulk of their income.

In short, if such workers are anxious, they’re right to be. So they’re not buying mansions or rushing to close — they’re wondering if the floor beneath them is as solid as it felt a year or two ago. It’s a quiet kind of panic: the pullback of those who still have money, but no longer feel safe. The result is weakening demand in what should be the most interest-rate-immune and resilient segment of the market.

There’s other evidence to suggest that the wealthy are parking capital, not deploying it. Numerous news reports, ahead of Nvidia $NVDA (NVDA) earnings expected Wednesday, are pointing out that some $7 trillion is sitting in money-market funds. While not all this cash reflects U.S. upper-middle-class wealth, a portion of it certainly does, suggesting affluent Americans may currently see more risk than reward in assets such as stocks and housing.

Still, the freeze isn’t confined to the top

At the other end of the market, would-be buyers are priced out by 7% mortgage rates and $400,000 median homes, an affordability crisis devouring some 43% of median household income.

When the housing market locks up at both ends, cost alone can’t explain the crisis. You have to look to confidence, and how that has gone missing.