Live Real Estate News
Hot is just one of the words you could use to describe the housing market over the last two years, with demand significantly outpacing supply, which had a major impact on inventories in as the average home was only on the market for 9 days at one point, as was the spike in the number of bidding wars that took place.
Although the market has slowed and price growth has cooled a bit, in general, home prices have not meaningfully declined as of late. In fact, over the last several years, the share of homes over $1 million has more than doubled to a rate of 1-in-20 homes.
According to a new blog post authored by Stephanie Horan for Today’s Homeowner with Denny Lipford using U.S. Census Bureau American Community Survey data, she analyzed data and paired it with recent market trends to examine why the number of $1 million homes has risen recently and their expectations for the future.
After analyzing the data for 372 cities, Horan found that the number of million-dollar homes had more than doubled between 2015-2021. One of the top cities, San Francisco, had 73% of their homes valued at more than $1 million, more than any other city in the country.
In addition, in 14 of the top cities, a third of the homes in their bounds were above the million-dollar mark; in 17 cities, the difference between the share of million-dollar homes and households that may be able to afford them exceeds 10%. There is an overlap across cities with large increases in million-dollar homes and the widest affordability gaps.
According to Census data, about 2.0 million homes in the country were valued above $1 million in 2015. By 2021, this number has increased to 4.2 million. The proportion of million-dollar homes in the U.S. has similarly almost doubled, rising from 2.7% to 5.0% in during the same time period.
“In 14 cities, the proportion of them has increased by more than 20 percentage points. Many of these metros are concentrated in the Pacific Northwest, including San Francisco, Seattle, and nearby cities,” said Horan. “Outside of California and Washington, Colorado’s Boulder also makes the list. The percentage of million-dollar homes in Boulder stood at 14.4% in 2015 but rose to 44.4% in 2021—a difference of 30 percentage points.”
At the state level, million-dollar homes are most prevalent in California and Hawaii. In California, more than 23% of homes are worth a million dollars or more and in Hawaii, the share of million-dollar homes exceeds 22%.
So who exactly can afford these homes? The research found that, putting down a standard 20% down payment and the mortgage not exceeding 30% of your monthly earnings, that singles or couples would need to be earning $200,000 or more to consider one of these homes.
On the other hand, the majority of American households do not make an annual income of $200,000 to buy a million-dollar home. This gap is highest in San Francisco, which is widely known for its unaffordable housing. Though 73% of the homes are valued at $1 million or more, less than 42% of households in the city earn $200,000 or more annually.
Horan also believes that, along with other experts, only expect the share of $1 million homes to grow in the future.
“Real estate experts are predicting a large increase in the number of million-dollar homes across the country. The trend is being driven by an influx of wealthy buyers looking to invest in luxury properties and a steady rise in property values in certain areas,” said Jennifer Spinelli, founder and CEO of Niche Home Buyer.
This affects both buyers and sellers. Spinelli continues:
“Buyers may need to act quickly when they find a home they’re interested in and be prepared to pay more for it than they would have just a few years ago. On the other hand, this could open up an opportunity for sellers looking to cash out at higher prices.”
Click here to see additional data and graphics from the source.