While the sale of homes costing $1 million has more than doubled since 2019, the size of these luxury homes are getting smaller, according to an analysis by Zillow. Homes that sold at or near $1 million have contracted nearly 500 square feet, from a peak of 3,021 in the middle of 2020 to 2,530 in early 2022, according to floor plan data for Zillow listings.
“Buyers with seven-figure budgets shopping for homes during the pandemic were doing so coming off the longest period of economic growth in U.S. history and with the help of historically low interest rates,” says Anushna Prakash, an economic data analyst at Zillow. “Sales for expensive homes soared, while buyers in the heat of competition accepted smaller layouts.”
Zillow defines $1 million homes as single-family homes that sold for between $950,000 and $1,050,000. Metros that had fewer than 30 sales of $1 million homes in any quarter from 2019 to 2022 were excluded from the analysis.
Zillow says the typical home in the $1 million range shrank in nearly every major metropolitan area in 2022, led by Phoenix (down 1,116 square feet from 2019) and Nashville (down 1,1019 square feet from 2019). Floor plans grew in just two major metros on a three-year basis: Minneapolis (up 36 square feet) and St. Louis (up 406 square feet).
Sales for homes in the $1 million range rose from 43,421 in the second quarter of 2019 to 90,110 in 2022, a new record volume, according to Zillow. The price range absorbed a larger volume as home values skyrocketed across the country during the pandemic. The share of single-family homes that sold for $1 million or more has increased to 6.4% in 2022 from 2.7% in 2019.
Portland, Oregon, led major metros in sales volume increase on a three-year basis, increasing 253%. Austin, Texas, where home values are up 71% since mid-2019, experienced a sales jump of 220% for homes priced at $1 million or more. Boston was the only major metro to experience a decline in the volume of transactions in the $1 million range (down 32% compared with 2019). The price per square foot for $1 million homes is the highest in San Jose, California, ($715 per square foot), while Hartford, Connecticut, was the metro with the lowest price per square foot for such homes ($205 per square foot). Several Midwestern metros, including Cincinnati, Indianapolis, Oklahoma City, and Kansas City, Missouri, also had low prices per square foot for homes sold for $1 million or more.
While the volume of sales for $1 million homes are higher on a three-year basis, the overall pace of home sales has slowed in recent months as affordability challenges have pushed many buyers to the sideline. According to a separate Zillow analysis, affordability challenges have shifted competition away from mid- and high-tier properties toward more affordable homes, a reversal of the prevailing trend during much of the pandemic. Zillow says the inventory of low-priced homes had a less-severe dip during the bulk of the pandemic and has grown back at a faster pace than other price tiers.
