A Plague of Million-dollar Homes Haunts U.S. Real Estate
Owning a million-dollar home isn’t as rare as it used to be. The share of homes valued at more than $1 million has increased by more than fourfold since 2002, according to data released by real estate site Trulia. The company analyzed luxury real estate markets in the top 100 U.S. metropolitan areas and found that 4.3 percent of homes across these regions are worth $1 million or more, compared with 1 percent in 2002.
Real estate values have risen dramatically since the housing crisis, resulting in higher price tags for many homes. Trulia also found that $1 million doesn’t necessary denote a “luxury” home. In some cities, a home value of $1 million or more is the norm rather than an indicator of top quality. This creates problems for lower-income buyers who can’t afford to keep up with the rising property prices, while cutting the amount of inventory that is available at prices under $1 million.
The share of homes valued at less than $1 million is “decreasing at a rate we’re surprised by,” said Trulia senior economist Cheryl Young. “It was 98.9 percent in 2002, and now it’s 95.7 percent. That is pretty shocking.”
Rising real estate values, a lack of new construction, and tight inventory are three issues contributing to the surge in million-dollar homes. Yet another factor may be contributing to the problem: rising income inequality, which has only benefited the bank accounts of the richest Americans.
The top 0.1 percent of American earners, or those who earn $6 million on average in income, have seen their incomes rise by 320 percent between the years 1980 to 2014, compared with just 42 percent for middle-income workers, according to research published in 2017 by Gabriel Zucman and fellow economists. This has created a huge divide in the spending power between the richest Americans and the middle class. It also gives those at the top the buying power to spring for homes worth $1 million or more.
It may also explain why the share of homes worth $5 million or more is growing even faster. These homes are what Trulia describes as “the most luxurious homes available.” While it only accounts for 0.28 percent of overall sales, this figure is five times higher than in 2002, Trulia said.
“It was interesting to think about whether $5 million is becoming the new $1 million,” Young said.
Young’s analysis found that homes worth $5 million or more tend to share a few traits, such as having ideal locations or views and “estate” or “park-like” grounds. They also tend to be larger than the median home and feature designs by well-known designers and architects.
A few listings also have unusual features, such as swim-up bars or bulletproof glass. They also have another quirk: more bathrooms than bedrooms.
“The crunch is obviously happening at the starter segment. That’s where affordability hits the hardest,” Young said. “As that share grows, the people it impacts are the people at the bottom.”
These are the five metropolitan areas with the largest share of homes worth $1 million in 2017:
- San Francisco: 66 percent
- San Jose, California: 56.4 percent
- Los Angeles: 23.8 percent
- Fairfield County, Connecticut: 17.7 percent
- Long Island, New York: 17.4 percent
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