The number of million-dollar U.S. homes has dropped dramatically from a record high last year.
They now account for 7% of all U.S. houses, down from 8.6% in June 2022, according to an analysis by Dana Anderson at Redfin.
This could signal a reversal in the housing market, at least on the luxury side. Prices soared so high and so fast that Fannie Mae and Freddie Mac raised their lending limits to $1 million in some metros back in 2021. The 18% hike was the highest single jump since at least 1970, outpacing the 15.9% increase seen in 2006.
The exception to the current trend is Florida, which now has more homes worth $1 million than it did last year because prices are still appreciating there. Six of the 10 metros with the biggest home-value increases last year were in the Sunshine State, and Miami, North Port, and West Palm Beach all saw 5%-plus YOY price jumps in January.
But as the market corrects and prices decline, super-expensive homes are becoming scarce. There are basically none in the Midwest, Rust Belt, and Texas, according to Redfin’s analysis. Expensive coastal metros where million-dollar homes exploded in the housing boom are seeing them slip away fast.
Rapid price appreciation while rates were historically low caused the share of million-dollar homes to swell.
Those homes snowballed into million-dollar cities, metros where the average home cost at least that much, which nearly tripled in 2021. Even typically inexpensive Western states like Idaho and Montana made the list with one or two cities.
Most million-dollar cities were in expensive coastal areas such as New York, San Francisco, and Los Angeles. Of all million-dollar cities, 60% were within a mere eight metros, with nearly half in California (44%).
Those areas are losing million-dollar homes the fastest, Redfin says. Just more than 80% of San Francisco homes are worth $1 million, the biggest share of the metros analyzed but 6.3% YOY. Oakland, CA, New York, and Seattle also saw YOY declines.
High mortgage rates mean that buyers in these areas aren’t getting much relief in these areas. When rates were in the 3%’s, home prices were higher but monthly mortgage payments were smaller than they are now.
“Home values are coming down from their peak and fewer sellers could fetch seven figures–but that doesn’t mean buyers are getting a break,” said Redfin Economics Research Lead Chen Zhao.
“The typical homebuyer’s monthly mortgage payment is even higher than it was when home values peaked in the spring because rates are so much higher and although home prices have come down, they certainly haven’t crashed. Now isn’t the time for buyers who need to take out a loan to get a good deal: Buying an $800,000 home today would cost more per month than buying a million-dollar home a year ago.”
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