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The number of million-dollar homes in the U.S. has declined from a high of 8.6 percent in June 2022 to about 7 percent in January 2023, as mortgage rates have cut into homebuyers’ purchasing power and the market has experienced a cooldown, Redfin reported on Monday.
That 7 percent share of million-dollar homes is about the same as it was a year ago, but up from 4.2 percent in January 2020, before the COVID-19 pandemic began.
In terms of the actual number of million-dollar-plus homes in the U.S., that figure dropped from 7,458,031 million-dollar-plus homes in June 2022 to 6,203,954 million-dollar-plus homes in January 2023. In other words, by a total of 1,254,077 homes.
Redfin’s report used data from the Redfin Housing Value Index, public records and MLS’s to determine the value of more than 99 million U.S. properties.
The fewer number of million-dollar-plus homes in the market is one more sign of the market’s cooling. As 6.5 percent-plus mortgage rates gave buyers pause and home prices recently saw their first annual decline in over 10 years, many homes that had been pushed into million-dollar territory at the peak of the market have now dipped back down to six figures.
Some of those price declines are likely also due to seasonality, Redfin noted, but the drop in prices between June and January is a bit larger than in typical years.
“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,” Redfin Economics Research Lead Chen Zhao said in a statement.
“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.”
At today’s 6.6 percent mortgage rate, a buyer with a 20 percent down payment would make a monthly payment of $5,241 for an $800,000 home. At the 3.5 percent mortgage rate that was common in early 2022, however, a buyer with a 20 percent payment would pay just $5,034 per month for a $1 million home.
As a result of soaring demand for housing and rising home prices during the pandemic, the number of homes worth seven figures nearly doubled since before the pandemic began.
Some of the country’s priciest coastal markets are seeing the greatest declines in million-dollar homes, including the San Francisco Bay Area, Seattle and New York. In San Francisco 86.3 percent of homes were worth at least $1 million in January 2022, and as of January 2023, that figure was down to 80 percent. In San Jose, the share dropped from 81.7 percent to 79.2 percent, in Seattle, 30.9 percent to 27.5 percent, and in New York, 32.5 percent to 29.5 percent.
San Francisco also saw one of the greatest declines in home prices overall during this period, with the median sale price falling 9.4 percent year over year from January 2022 to January 2023. In addition to pandemic trends, the area’s drop in tech workers has also contributed to falling prices, which has resulted from remote work, industry layoffs and falling stocks.
At the opposite end of the spectrum, Florida has seen a surge in million-dollar homes as the state’s popularity, and therefore, home values, have increased in response to pandemic-related factors and remote work policies. The number of million-dollar homes in Miami rose from 11.5 percent one year ago to 14.4 percent in January, while that share increased from 9.1 percent to 11.3 percent in North Port and from 11.1 percent to 12.8 percent in West Palm Beach.