Million-Dollar Home Growth “Haunts” Real Estate Market
A growing number of high-priced homes is affecting affordability in already-high-priced markets and having a ripple effect for area starter-home buyers, finds a new report form CBS News. Real estate values, inventory shortages, new construction inactivity and income inequality are all said to be contributing to the rising share of million-dollar homes.
“Surprising” growth for million-dollar home share
The share of homes valued at more than $1 million has reportedly surged more than fourfold in the last 15 years, according to a new report from Trulia, the real estate data firm. Considering the top 100 U.S. metropolitan markets, 4.3 percent of homes are now said to be worth at least $1 million, compared to one percent of homes in 2002.
Cheryl Young, senior economist for Trulia, told the news outlet the rate at which the below-million-dollar real estate market is shrinking was “surprising” and the results of the new analysis were “pretty shocking” to the team of real estate experts.
New luxury level begins at $5 million price point
The article makes the distinction that million-dollar homes aren’t necessarily luxury homes. Regional economic and industry factors are reportedly pushing up the price of otherwise normal homes, as has become the case in San Francisco, where 66 percent of homes are valued at more than $1 million. More than half of homes in San Jose, Calif., and more than a fifth of Los Angeles home are valued at over a million. Fairfield County, Conn., and Long Island, N.Y. also have a high share of million-dollar homes.
As million-dollar price tags become the norm in some cities, Young told reporters a new price-level denoting luxury has emerged. “It was interesting to think about whether $5 million is becoming the new $1 million,” she said. This still-rare segment of home sales is said to be growing at an even faster pace, quintupling from 0.05 percent of sales to 0.28 percent of sales since 2002.
Million-dollar markets will impact first-time home buyers
“The crunch is obviously happening at the starter segment,” concluded Young. “That’s where affordability hits the hardest. As [the million-dollar] share grows, the people it impacts is the people at the bottom.”