Million-dollar home listings are the norm in these cities
More than half of all homes for sale in five large American cities are listed at $1 million or more, according to a new analysis.
A report from Point2, an online real estate marketplace, finds that 64 percent of Los Angeles properties are listed above $1 million. Seven-figure listings are the norm in four other large cities: San Francisco (62 percent), San Jose (61 percent), San Diego (59 percent) and Boston (53 percent).
All of those million-dollar listings invite a question: In an era of sharply higher mortgage rates, will they sell?
Million-dollar homes became standard in many affluent markets between 2020 and 2022, a span that saw median sale prices rise more than 40 percent across the United States, from $329,000 to $479,500. But prices have slid just as sharply in 2023, dropping nearly 10 percent to $436,800 in a single quarter.
The reason is rising rates. Since July 2021, the average rate on a 30-year mortgage has risen from 2.9 percent to 6.8 percent.
During the run-up in real estate prices, the share of U.S. homes valued at more than $1 million doubled from 4.2 percent to 8.6 percent, according to a Redfin analysis. The figure has since slid to 7 percent.
In the days of the 3-percent mortgage, the million-dollar home felt within reach for many American buyers. Those days are gone. Higher mortgage rates mean higher monthly payments.
“Ballooning mortgage costs have cooled buyer demand,” said Jeff Tucker, a senior economist at Zillow. “Homes are staying on the market longer than they did during the peak of the pandemic frenzy, and that’s especially true for the highest-priced homes in each market.”
Higher rates make lower-priced homes more attractive. Sales prices for entry-level homes rose 8 percent between 2022 and 2023, according to a report from Zillow.
Top-tier homes, meanwhile, declined in value for the first time in a decade. San Francisco, San Diego and Seattle all registered double-digit drops in top-tier home prices, Zillow found.
“Those are the markets that have cooled the most, in terms of demand,” said Taylor Marr, deputy chief economist at Redfin.
The volume of luxury home sales nationwide declined by 45 percent between 2022 and 2023, the steepest drop in at least a decade, according to Redfin.
“Uncertainty is the main factor driving the luxury-market slowdown in Los Angeles,” said Alin Glogovicean, a Redfin real-estate agent. “Everyone is kind of at a standstill.”
A report from the Institute for Luxury Home Marketing found more encouraging data for sellers in recent months. The median sale price for single-family luxury homes remained essentially flat at about $1.4 million between May 2022 and May 2023.
“Despite lingering uncertainty outside the luxury real estate market, the steadiness of prices, sales, and inventory levels have resulted in a consistent increase in the demand for luxury properties during the first five months of 2023,” the report states.
Most luxury homeowners locked in mortgages at historically low rates. Selling the home now would mean taking on a new mortgage at a higher rate. That fact, coupled with the aforementioned uncertainty, is prompting many owners not to sell.
The low inventory of luxury homes for sale has kept prices competitive, delivering much-needed leverage to sellers, Marr said.
“They’re not the starter home. They’re the home the family moves into for more space in the suburbs,” Marr said. “Those are the ones that are the most in demand, and have also seen the most drop in supply.”
Even after the pandemic-era surge in home prices, million-dollar homes remain relatively rare in most large cities. Seven-figure sales prices represent 41 percent of all listings in New York, 34 percent in Seattle, 26 percent in Washington, D.C., 17 percent in Chicago, 11 percent in Houston and 7 percent in Philadelphia.