Million-dollar homes are smaller and older than before the pandemic
After two years of double-digit price growth in the housing market, buyers are discovering that a million dollars just doesn’t stretch as far as it used to.
According to a new analysis of the real estate platform Zillow.
In the second quarter of 2019, a $1 million home had a median square footage of 2,900 square feet. Three years later, that number had shrunk nearly 10% to 2,624 square feet.
“Bathrooms were the biggest victim of this loss of square footage,” the report said. “Only four of the metros observed saw the median million-dollar home retain the same number of bathrooms compared to 2019. The others lost at least the powder room.”
Zillow calls the trend “shrinkflation” – a phenomenon that occurs when an item’s price stays the same but the amount you receive decreases. It also happens to groceries and household items like paper towels, as inflation drives up prices and businesses try to recoup some costs.
As far as the housing market is concerned, this contraction is the result of a severe supply and demand imbalance during the pandemic. With fewer homes on the market, buyers faced fierce competition and, in many cases, ended up paying far more money for far fewer homes.
It also explains why the typical million-dollar house is aging in many cities: an existing housing shortage has been exacerbated by supply chain issues that have slowed construction as well as a crush in demand. Zillow found that in San Diego, million-dollar homes sold in 2019 were typically 16 years younger than those sold in 2022.
As is always the case with real estate, the trend is more pronounced in some cities and noticeably absent in others. Zillow found that the contraction of million-dollar homes is most evident in pandemic boom cities like Phoenix, Nashville, Austin and Miami.
In Phoenix, for example, the median square footage of a million-dollar home increased from 4,049 in 2019 to 2,933 in 2022. In St. Louis and Minneapolis, by contrast, homes of a million dollars are actually bigger and bigger.
More home sales for $1 million and more
Understandably, it’s now more common for buyers to pay $1 million or more for homes: Sales of $1 million or more accounted for 6.4% of single-family home closings in the second quarter of 2022, according to Zillow, compared to just 2.3% of the market in 2019. An older report also indicated that there were nearly 500 cities in the United States where the typical home was worth $1 million or more.
It’s hard to say if a $1 million home will continue to decline and if buyers will continue to get less bang for their buck in the future.
Many real estate agents say the housing market has changed dramatically in recent months, and the data confirms the sentiment: sales are slowing, as is construction, and price growth is stabilizing as the bidding wars that have defined the past two years fade. .
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