Middle-income housing across America — particularly in big coastal cities — is growing scarcer than ever, as the wealthy bid up properties that might once have been considered "affordable."

Why it matters: The pandemic's effects on the housing market may turn out to be permanent — and could widen the gap between rich and poor. Renters and buyers alike face rising prices that outstrip income growth and favor people with cash savings.

Driving the news: The median price of a single family home in California crossed the $700,000 mark this summer — a record — setting a new standard for what the American Dream might cost.

Housing experts say it's a trend that's accelerated over the last five months and tied directly to the pandemic: Low interest rates — which the Fed seems inclined to keep, thanks to coronavirus — are lulling people into the market at a time when everyone's craving more space to live and work.

• "Starter" homes in cities that attract young people are almost nowhere to be found.
• They're also growing harder to find in exurbs. People leaving San Francisco, where the median home price is $1.1 million, will still have to pay nearly $500,000 if they move to Sacramento.
• "Affordability has been a challenge that predates this crisis, and it’s one that’s been accelerated by this crisis," Jordan Levine, deputy chief economist for the California Association of Realtors, tells Axios.
• "It seems like finding a house is a bit like trying to buy the new PlayStation 5,” says Ryan Lundquist, a Sacramento home appraiser.

Nationally, the story is the same: The cost of buying a house was up 7% in September, the Case-Shiller index showed recently.

• Phoenix, Seattle and San Diego were the cities with the biggest price leaps, Case-Shiller found.

How it works: The last five months have seen a real estate frenzy. Even as many Americans have struggled to pay rents and mortgages, the wealthy have paid above-asking prices for homes that used to be worth a lot less — leaving the low end of the market hollow.

• From there, a chain reaction keeps low and middle-income people in rentals and leaves fewer financial incentives for developers to build anything but high-end homes.
• "Supply appears to be the tightest for low and moderate cost homes," said Alexander Hermann of the Harvard Joint Center for Housing Studies, an author of a recent report on the current housing scene.

"It's not a California issue — it's a nationwide phenomenon," said Lawrence Yun, chief economist at the National Association of Realtors. "In terms of the relationship between people's incomes rising and home prices rising, we are at a historical lack of synchronicity."

What's next: The best solution will be to enact policies that encourage homebuilding, policy experts said. Since mortgage rates are likely to remain at historic lows — continuing to encourage home sales — the easiest fix may be to build our way out.

• Single-family housing starts have remained stubbornly under 1 million for over a decade, but there's hope they will rise in 2021, given the obvious demand.
• "The only way to fix a deficit of supply is to build more homes, and to make it cheaper to build new housing," says Jenny Schuetz of the Brookings Institution, who wrote a report on housing stress on the middle class.