The United States is experiencing an unprecedented surge in homes valued at $1 million or more. According to real estate brokerage Redfin, 8.5% of homes in the country now fall into this price bracket, marking an all-time high. This figure surpasses the 7.6% recorded a year ago and more than doubles the pre-pandemic level of 4%.
The primary driver of this surge is the rapid increase in home prices. The median national sales price climbed by 4% year-over-year in June, pushing numerous homes past the million-dollar threshold. Even luxury properties, which were already expensive, witnessed a steeper price increase, with their median sale price reaching $1.18 million in the second quarter, reflecting a 9% year-over-year jump.
The rise in luxury home prices significantly influences the overall million-dollar housing market. Many homes previously hovering near the million-dollar mark were finally pushed past it due to the significant price increases. While mortgage rates have more than doubled since their pandemic lows in early 2022, significantly increasing monthly housing costs and cooling home sales, a persistent housing shortage has kept prices elevated due to intense competition.
Despite a recent improvement in the number of homes for sale, it remains significantly below pre-pandemic levels. Many homeowners are reluctant to give up their low mortgage rates, further contributing to the housing shortage. This market dynamic benefits homeowners and sellers, increasing the likelihood of their homes being valued at over $1 million.
However, for prospective buyers, particularly first-time homebuyers, the growing number of million-dollar listings makes homeownership increasingly out of reach. “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 Julie Zubiate, a Redfin Premier agent in the San Francisco Bay Area, where the majority of homes go for at least $1 million. “The people who are buying without hesitating 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 declines in mortgage rates have provided a much-needed boost to homebuyers, increasing their purchasing power by tens of thousands of dollars. According to Zubiate, the downward trend has reignited interest in the Bay Area housing market.
California boasts the largest share of million-dollar homes in the United States, with its number increasing faster than anywhere else. However, nearly everywhere in the U.S., there are more million-dollar homes than a year ago. There are exceptions, however. Austin, Texas, once a hotbed of rapid price growth, saw a slight decline in the percentage of million-dollar homes. Indianapolis and Houston experienced no change in the category. Experts attribute the stability in Austin and Houston to a surge in new construction, which has helped increase housing supply and moderate price increases.
The increasing number of million-dollar homes highlights the ongoing challenges and opportunities in the real estate market. While it represents a significant financial gain for homeowners and sellers, it underscores the growing affordability concerns for prospective buyers, particularly in areas with limited housing supply and high demand.
