The U.S. housing market has witnessed a surge in luxury homes. According to a new report by Redfin, just over 8% of U.S. homes are valued at $1 million or more, approaching June 2022’s record high of 8.6%. In Atlanta, MarketNsight data shows the same thing, with new and resale closings of homes more than $500,000 making up the bulk of the market.
Luxury Market Grows Amid Inventory Scarcity
After plummeting to a 12-month low of 7.3% in February, the share of million-dollar homes is rebounding. Scarcity in inventory is propelling prices upward. The median U.S. home-sale price swelled 3% in July, marking the steepest increase since last November. High-end homes are experiencing even faster growth, with a 4.6% year-over-year rise to $1.2 million in Q2.
This pricing surge is happening at a time when elevated mortgage rates are causing potential sellers to remain in their current homes, taking advantage of their low mortgage rates. With inventory at rock bottom and many buyers deterred by high rates, those still in the market are fiercely competing for the limited available properties. This competition is driving prices to new heights, pushing many homes over the million-dollar threshold.
“The supply shortage is making many listings feel hot,” observed Chen Zhao, Redfin’s Economics Research Lead. He noted that expensive properties in good condition are drawing buyers and even sparking bidding wars in certain areas.
East Coast Gains, West Coast Drops
East Coast metropolitan areas, particularly parts of New England, are seeing the quickest increase in million-dollar homes. The Bridgeport, CT metro, which includes many popular New York City suburbs, leads the way at 25.8%, up from 23.1% a year ago.
In contrast, pricey West Coast metros are losing million-dollar homes the fastest. Seattle experienced the most significant drop, from 39.3% to 33%, followed by Oakland, CA (55.1% to 49%), and Oxnard, CA (40.2% to 34.5%).
California still has the country’s highest share of million-dollar homes, led by San Francisco at 81.2% (down from 84.2% last year).
Economic Signals and Future Trends
Recent indications that the U.S. might avoid a broad recession could lead to increased confidence among high-end buyers. “There may be more demand coming down the pipeline,” said Zhao.
The percentage of homes worth $1 million or more has doubled since before the pandemic, largely due to soaring home prices driven by record-low mortgage rates and remote work trends in 2020 and 2021.
However, not all regions are experiencing this growth. Million-dollar homes are virtually nonexistent in several inexpensive metros, including parts of Texas and upstate New York.
Conclusion: A Complex Landscape
The current landscape of million-dollar homes in the U.S. is complex and multifaceted. While the East Coast sees rapid gains, the West Coast experiences declines. Scarcity of inventory and elevated mortgage rates play pivotal roles in this trend.
As we move forward, potential changes in the economy and interest rates could further shape this fascinating segment of the real estate market. Whether the current trend towards more million-dollar homes continues will depend on various macroeconomic factors and regional dynamics.
For a comprehensive view of the report, including more on $1 Million home sales, charts, methodology, and additional data, please visit Redfin’s official page here.
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