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A $1 million home no longer guarantees luxury in much of the United States, as years of rising prices have pushed millions of properties into seven-figure territory.
The number of owner-occupied U.S. homes worth at least $1 million climbed from about 1.5 million in 2005 to 6.9 million in 2024, according to an analysis from the National Association of Realtors (NAR). Those homes now make up 8% of the market, up from 2% two decades ago.
The shift is most dramatic in high-cost markets. About 40% of owner-occupied homes in Hawaii are valued at $1 million or more, while roughly one-third of homes in California and Washington, D.C., have reached that level, the report noted.
By contrast, million-dollar homes account for about 1% of properties in Mississippi, North Dakota and West Virginia.
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Billy Rose, founder and vice chairman of real estate brokerage The Agency, told FOX Business that the $1 million mark stopped representing true luxury in Los Angeles years ago.
“In L.A., it seems like there’s so much wealth here and there’s so much elevated housing that the million-dollar threshold now is truly entry,” Rose said.
Some first-time buyers in the region begin their searches at around $2.5 million or $3 million, he added.
Buyers are also confronting stubborn prices and limited inventory in many markets. Rose said sellers remain anchored to values reached when borrowing costs were lower, while buyers are waiting for better deals.
“That has put kind of a staring contest between buyers and sellers,” he said.
The $1 million threshold also appears to shape buyer behavior.
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Since 2015, about 2.4 times more homes have sold just below $1 million than just above it, according to NAR. Buyers may set searches below the round number, face different mortgage requirements or encounter taxes that begin at $1 million.
New York’s mansion tax is one example. The tax has applied to purchases of $1 million or more since 1989, even though that amount would equal about $2.7 million today after adjusting for inflation, the report noted.
The 1% tax adds $10,000 to the purchase of a $1 million home.
“I think you need to be looking at whether those thresholds need to increase and be more keeping with the times,” Rose said.
The changing definition of luxury is also not limited to the U.S., according to a recent report from The Agency.
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In markets near Toronto, 1 million Canadian dollars, or about $731,000, no longer buys true luxury, Steve Bailey of The Agency noted. Bailey said luxury properties generally begin closer to 1.7 million to 3 million Canadian dollars, or about $1.2 million to $2.2 million.
The U.S. housing market is moving in two directions, with a recent Zillow report finding that luxury demand is surging while starter-home sales are softening as inventory in that segment grows.
Rose said the trend reflects a broader “K-shaped economy,” in which wealthy buyers have greater financial flexibility while lower-income buyers face more pressure.
“It’s creating a larger divide between, you know, the haves and the have-nots,” he said.
FOX Business’ Eric Revell contributed to this report.
