Remember When Owning a Million Dollar Home Was a Sign of Wealth and Status?
According to Redfin, a giant real estate brokerage firm, nearly one in ten homes in the U.S, are worth at least one million dollars. To be more precise, that number is just over 8%. This is not far off from the all-time high of 8.6%. As recently as February of this year the number was 7.3%. Home prices are increasing on a year-over-year basis after declining at the beginning of the year.
The median U.S. home sale price rose 3% year over year in July, the biggest increase since last November. Prices are rising at a faster clip for luxury homes, with the median sale price for these homes up 4.6% year over year to 1.2 million in the second quarter of 2023.
Due to elevated mortgage rates which incentivize homeowners with far lower rates not to sell there is a shortage of homes on the market. As a result, inventory is scarce, and homebuyers are competing for the relatively few available homes on the market. Steady demand is driving up prices. Consequently, according to Realtor.com. the number of homes on the market decreased by 6.4% this July compared to July a year ago.
“In most of the country, expensive properties that are in good condition and priced fairly are attracting buyers and in some cases bidding wars, mostly because for-sale signs are few and far between right now,” says Redfin Economics Research Lead Chen Zhao. “Recent economic signals that the U.S. may avoid a broad recession could cause high-end buyers to feel more confident in making a major purchase in the coming months. There may be more demand coming down the pipeline.” Hence, “there’s no rush to offload high-value homes.”
The share of homes worth a million or more has more than doubled since pre-pandemic levels when just over 4% of homes were valued at one million. The share shot up when home prices skyrocketed in 2020 and 2021 when there were record-low mortgage rates.
But there are significant variances by region. For example, 25.8% of homes in the Bridgeport, CT metro are worth at least one million., up 23.1% from a year ago, representing the biggest increase in the country. Boston was second with an increase from 20.3 to 21.5%.
Nationally, the number of homes worth $1 million or more rose year over year in 55 of the 99 most populous U.S. metros, with most under one percentage point.
On the west coast, the story is quite different. This is the region that is losing million-dollar homes the fastest. Seattle scored the biggest drop in million-dollar homes from 39.3 to 33%. Oakland, CA (55.1% to 49%) and Oxnard, CA (40.2% to 34.5%) placed second and third, respectively. Also seeing drops in the million-dollar category were Los Angeles, San Diego, San Jose, San Francisco, Anaheim, New York and Washington, D.C.
In other regions, million-dollar homes are scarcer. Few million-dollar homes can be found in several inexpensive metros (below 0.5%) including parts of Texas and upstate New York, Omaha Nebraska, and rust belt states such as Ohio, and Illinois.