February 8, 2025
Million-dollar homes are ‘middle class’ option for homebuyers in many cities

[ad_1]

Home buyers in some cities have no choice but to buy million-dollar homes as prices are near all-time highs.

The share of million-dollar homes is on the rise across the country. Redfin found that 8.2% of homes in the US are now priced in the seven digits, up from 7.3% in February and just short of the peak of 8.6% recorded in June 2022. Out of the 90 million households studied, about 7.46 million units were more than one million.

A separate report from LendingTree found that two California cities have a higher share of million-dollar homes than properties just under that mark. The percentage of homes worth more than $1 million was 66.28% in San Jose and 52.91% in San Francisco. Los Angeles ranked second with 26.48%, San Diego 23.15% and Seattle 18.70%.

The report emphasizes how in many markets, million-dollar homes are not necessarily luxurious; Rather, they are the norm, leaving many home buyers with few affordable options.

Jacob Channel reports, “There are a lot of areas at this point, especially really expensive areas, where million-dollar homes have not only become more common, but they’ve also become more middle class, for lack of a better term.” have also become author and senior economist at LendingTree told Yahoo Finance.

Limited supply for homes priced below a million in these cities

A quick search on Redfin shows the dire situation in some cities.

There are 1,230 homes for sale in San Diego, but as of Wednesday only 529 units are listed for $1 million and less this week.

Of these, only 114 properties have three or more bedrooms and only 63 units are single-family homes. That brings the share of homes for homebuyers $1 million and under to 43% and three-bedroom-plus single-family homes to 5.1%, according to active Redfin listings through August 30, 2023.

Some cities have a larger share of million-dollar homes than properties under that mark, leaving homebuyers with limited affordable options.

“It really shows how expensive a lot of housing markets can be and what kind of housing people can expect in those markets,” Chanel said. ,[These homes] Not spacious, only a few bedrooms, modest amenities.”

According to data provided by Compass, the median home sale price in Santa Clara County — where San Jose and Silicon Valley are located — was $1.8 million in the second quarter. The monthly mortgage on a home at that price is close to $9,900, based on an average 30-year interest rate of 7.28% for a jumbo loan and a 20% down payment of $360,000.

Read more: What the latest Fed rate hike plan means for mortgage rates and loans

More homes sold between $3 million and $4 million (391 units) than homes sold for less than $1 million (285 units) during the six-month period reported through July 15.

“Even if you earn $100,000 or $150,000, it may not be enough to buy a modest or suitable home for you and your family,” Chanel said. “We’ve certainly seen that where people working in high-paying tech industries, finance etc have also found themselves pushed further and further away from city centres.”

The median home price in San Francisco was $1.335 million, even after a significant drop in prices during the recent housing downturn. The monthly mortgage payment at this price is $7,307, down 20% and with a 30-year rate of 7.28%.

There were 897 units that sold for more than $1 million during the six-month period reported on July 15, including 10 properties that sold for more than $10 million.

How many sold for less than $1 million in San Francisco during the same period? Only 100 units.

These sales also create an unhealthy vicious cycle. The owners of these million-dollar homes, in turn, become home buyers themselves, but armed with cash to bid on their next property.

Aerial view of residential neighborhood in San Jose, South San Francisco Bay, California

An aerial view of a residential neighborhood in San Jose, California.

This is also visible in the data.

The level of all cash purchase activity in April 2023 reached a 9 year high or 33.4%. One-third of all US homes purchased this spring were by all-cash buyers. All-cash activity levels have been rising steadily since April 2020, as sellers redeem their equity and borrowing becomes costlier.

“More people are buying homes in cash than in recent years,” said Patrick Carlisle, chief market analyst for the San Francisco Bay Area at Compass. “Of course, this doesn’t help ordinary people because ordinary people can’t buy anything with cash. We have a very strange situation going on at the moment.”

This is a problem for cities like San Francisco because essential government workers are struggling to afford living in the communities they serve.

Carlisle said, “The fact that ordinary people — school teachers and firemen and policemen and people who work in stores — can’t afford to live in the county where they work is not good and it’s not a healthy social responsibility.” The situation is not.” “It’s very upsetting.”

Rebecca Chen is a reporter for Yahoo Finance and previously worked as an Investment Tax Certified Public Accountant (CPA).

Click here for the latest economic news and economic indicators to help you with your investment decisions

Read the latest financial and business news from Yahoo Finance

Source

[ad_2]

Leave a Reply