Record 8.5 Percent of American Homes Now Cost at Least $1 Million

A community in the North County region of San Diego, California, on March 25, 2024. Jane Yang/The Epoch Times

The share of million-dollar homes in the United States has risen to a new high as elevating home prices keep pushing properties into the price bracket, according to a report by real estate brokerage Redfin.

A record 8.5 percent of American homes are now worth $1 million or more, the “highest share of all time,” according to an Aug. 16 report. This is more than double the four percent rate prior to the COVID-19 pandemic. California has the biggest share of the category, with the state seeing new high-priced homes popping up faster than anywhere else. The city with the highest share of homes worth over $1 million was Anaheim, followed by San Diego, and Los Angeles.

Redfin attributed the increase in million-dollar houses to “record high” home prices. Even though price growth has eased slightly since the beginning of the year, home prices have been rising steadily on a year-over-year basis. This has pushed up the value of many homes to seven figures.

Since 2022, mortgage rates have been at a level that is double their pandemic-era lows, adding to the high cost of homes and dampening demand, the brokerage stated.

While soft demand should have brought down home prices, an ongoing supply shortage has prevented this from happening. Despite inventory improving in recent years, it’s still roughly 30 percent below the pre-pandemic levels.

This is because many homeowners are not putting their properties on the market due to the high rates, Redfin noted. The owners bought their properties when mortgage rates were lower, and as such, selling these properties now indicates they now need to take a higher-rate mortgage to buy a new home.

For buyers, especially those looking to purchase their first home, rising prices are making it difficult to afford a house.

“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,” said Julie Zubiate, a Redfin Premier agent in the Bay Area.

“The people who are buying without hesitating are in tech and work at Google, Apple, Facebook, or a similar company. Many Bay Area buyers—especially those without tech money—are getting more selective, jumping ship if a small problem comes up in, say, the inspection.”

Meanwhile, Lawrence Yun, chief economist at the National Association of Realtors, suggests some respite for buyers is coming, pointing out that there is a “slow shift” from a seller’s market to a buyer’s market, according to a July 23 news release.

Even though the median price of homes has hit a record high, Yun says further “large accelerations” are unlikely in the market. “Supply and demand dynamics are nearing a balanced market condition,” he said.

Foreclosures and Interest Rates

Amid elevated housing prices, foreclosures of properties have fallen in the first half of the year, according to real estate data curator ATTOM. Foreclosure filings in the first six months of 2024 were 4.4 percent below the same period last year. Foreclosure starts also declined.

“These shifts could suggest a potential stabilization in the housing market; however, monitoring these evolving patterns remains crucial to understanding the full impact on the real estate sector,” said Rob Barber, CEO for ATTOM.

On the flip side, July’s foreclosure filing numbers were 15 percent up from a month prior, signaling a potential reversal in the trend. Both foreclosure starts and completed foreclosures also increased.

“These shifts may highlight growing pressures in certain areas,” Barber said. “However, soaring home prices seem to continue and have spiked the value of homes across the nation, which boosts equity for homeowners at virtually every stage of paying off mortgages.”

Rising foreclosure rates can be triggered by high interest rates. Elevated rates put considerable pressure on homeowners with variable- or adjustable-rate mortgages. As rates rise or remain elevated for a long time, these homeowners now have to pay a larger portion of their incomes on paying interest.

Some owners could face difficulties in meeting their obligations, eventually leading to foreclosures.

The 30-year fixed mortgage rate has remained above six percent for almost a year, putting pressure on homeowners’ finances.

The federal funds rate, a key driver of mortgage rates, has remained elevated in a range of 5.25 to 5.5 percent for over a year.

As long as the federal rate does not dip meaningfully, mortgage rates may not come down in any significant way either, making mortgage payments a tougher issue for homeowners.