Share of million-dollar homes drops from 2022 peak
After maxing out in June, the percentage of million-dollar homes fell and is nearly flat year-over-year. In pricey markets, the declines were more pronounced.
Key points:
- In January, 7.1% of homes were valued at a million dollars or more, down from a high of 8.6% in June 2022.
- The Bay Area, Seattle and New York had the biggest drops among the 99 metros analyzed.
- Low inventory is keeping prices elevated in pricey markets, and buyers are still out there for million-dollar homes.
Fewer homes are hitting the $1 million mark, but the million-dollar question remains: What will tight inventory do to prices?
Just 7.1% of homes are valued at or above $1 million vs. 8.6% at the peak of the market in June 2022, according to a new report from Redfin that analyzed data from the Redfin Housing Value Index.
But "that doesn't mean buyers are getting a break," said Redfin Economics Research Lead Chen Zhao. After historic interest rate increases in 2022, "buying an $800,000 home today would cost more per month than buying a million-dollar home a year ago."
Nationally, the surge and subsequent drop in home values in 2022 has resulted in almost no year-over-year change in the share of million-dollar homes — though compared to pre-pandemic levels, the percentage is way up. In January 2020, just 4.2% of homes were worth $1 million or more.
In markets with a high proportion of expensive properties, the declining share of million-dollar homes has been more profound. Of the top five markets with the biggest drops, three are in California, led by Bay Area metros. In January, 80.3% of homes in San Francisco were worth a million dollars or more. While that percentage may seem eye-popping, a year ago the number was even six points higher.
Nearby Oakland had the second-highest annual drop with a decline of just over five percentage points. Coming in third was another West Coast city, Seattle, which saw a 3.4 percentage point decline over January 2022. Rounding out the top five cities with annual declines were New York, which dropped three points to 29.5%, and San Jose, which lost 2.5 points but is just behind San Francisco when it comes to the highest share of million+ homes (79.2%).
Seasonality explains some of the decline from the June peak, and home values at all price points have come down from their record highs as the market has cooled.
Million-dollar starter homes in Seattle
Still, inventory is tight, which means demand will keep prices elevated in expensive markets.
"I would not have expected there to be a decrease in million-dollar homes, given the overall stats and trends I'm seeing in our market," said Sandra Hines, a broker with Realogics Sotheby's International Realty in Seattle. Median home prices are down slightly, she said, but she thinks price reductions will be short-lived due to low inventory.
"A few years ago, $1 million was significant, but we've gone up so quickly, and now I'm seeing a lot of young professionals paying that much for a starter home, just to be in Seattle," said Hines.
Hines believes the year-over-year drop in January might reflect an "absorption" of stale inventory from last year. "When interest rates started going up, we had a bunch of sellers running to the market, but they missed the boat by a few weeks and priced too high. Homes were then sitting on the market for 60-90 days. Based on what I've been seeing over the past few weeks, I'd expect the data to look different in February and March."
"Homes that are priced right and prepped well are still getting multiple offers for 5-10% over asking," said Hines.