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In some markets, a $1 million home is considered a luxury property — but the number of places in which that still holds true is shrinking all the time.
The number of homes in the U.S. with an estimated value of $1 million or more has hit a new high, with 8.5 percent of all homes hitting that value, according to data from Redfin provided to The Wall Street Journal.
Last year, the share of $1 million homes in the U.S. was 7.6 percent. Before the pandemic, it was just 4 percent.
More homes are commanding that once-lofty price as home prices have soared nationally. The median home sale price was up 4 percent year over year in June to a record $442,525, according to Redfin. Meanwhile, the median sale price for luxury homes, or the top 5 percent of the market, increased 9 percent year over year to a record $1.18 million during the second quarter of 2024.
“Years ago, if you owned a $1 million home, you would have been considered pretty rich,” Redfin economist Chen Zhao told The WSJ. “Now, that’s the entry point for some markets.”
Although homebuying demand has softened in recent quarters because of high mortgage rates, prices continue to rise due to low inventory, which is driving competition, Redfin’s report stated. Inventory has grown in recent months, but is still approximately 30 percent lower than pre-pandemic levels.
The growing share of $1 million homes in the U.S. is a good thing for homeowners and sellers since it means growing equity in their portfolio, but it adds to affordability challenges for homebuyers, especially those purchasing their first home.
“Home prices, insurance and mortgage rates have shot up so much that many people are either priced out of the market or weary of committing to such a high monthly payment,” said Redfin Premier agent Julie Zubiate, who is located in the Bay Area.
“The people who are buying without hesitation are in tech and work at Google, Apple, Facebook or a similar company. Many Bay Area buyers — especially those without tech money — are getting more selective, jumping ship if a small problem comes up in say, the inspection. They’re spending too much money to rationalize not getting everything on their must-have list.”
Recent drops in mortgage rates have helped buyers with affordability, increasing their purchasing power by tens of thousands of dollars, Redfin noted. That drop is bringing some buyers back into the market, Zubiate said.
The share of $1 million homes is also growing in most major metros across the U.S., except for Austin, Texas, where it declined by 0.1 percent year over year and Indianapolis, Indiana, and Houston, Texas, where the share of $1 million homes stayed flat on an annual basis. In Texas, a push on new construction has helped curb prices.
Source: Inman
