What does this mean to homebuyers?
Redfin has released a report revealing that a record 8.5% of US homes are now valued at $1 million or more. This marks the highest share ever recorded and reflects a significant rise from 7.6% a year ago. The number of million-dollar homes has more than doubled compared to pre-pandemic levels when the figure stood at just 4%.
The increase in high-value homes comes despite elevated mortgage rates, which have dampened homebuying demand. Instead of falling, prices have continued to climb, fueled by a significant shortage in housing supply. The nationwide median sale price rose 4% year-over-year in June 2024, continuing a year-long trend of price increases. Luxury homes, in particular, have seen the steepest rise, with median sale prices jumping 9% to reach a record $1.18 million in the second quarter of 2024.
Redfin has attributed this price increase to the shortage of available homes, which has persisted despite recent improvements in inventory. The current supply remains 30% below pre-pandemic levels as many homeowners are locked into historically low mortgage rates, disincentivizing them from selling.
Rising home values squeeze first-time buyers
For sellers, the increase in home values translates into higher profits. However, for buyers, especially first-time homebuyers, the growing share of million-dollar homes creates an increasingly challenging market. Julie Zubiate, a Redfin Premier agent in the Bay Area, highlighted the pressures on prospective buyers. “Home prices, insurance, and mortgage rates have shot up so much that many people are either priced out of the market or weary of committing to such a high monthly payment,” she said. Buyers in the Bay Area, she added, are becoming more selective, unwilling to compromise on their must-have lists due to the high costs involved.
California metros, already known for their expensive real estate, are seeing the fastest growth in million-dollar homes. In Anaheim, 58.8% of homes are now worth at least $1 million, up from 51% last year. Similar trends are observed in San Diego and Los Angeles. Meanwhile, in the Bay Area, where median home prices are approximately $1.5 million, about 80% of homes are valued at seven figures.
Conversely, in cities like Detroit, Cleveland, Pittsburgh, and Kansas City, MO, fewer than 1% of homes reach the million-dollar mark.
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