The share of U.S. homes worth $1 million or more has hit an all-time high as a shortage of housing inventory continues to drive prices upwards, the Wall Street Journal reported.
Roughly 8.5% of U.S. homes are now worth $1 million or more, up from 7.6% a year ago and 4% prior to the COVID-19 pandemic, an analysis from real estate brokerage Redfin provided to the WSJ found. Median U.S. home sale price rose to a record $442,525 in June, while the median price for luxury homes — defined as the top 5% of listings — reached a record $1.18 million in the second quarter, according to Redfin.
Home prices have skyrocketed as many Americans are unwilling to list their homes and give up the ultra-low mortgage rates they secured prior to the Federal Reserve’s 2022-2023 interest rate hikes, in turn constraining housing inventory. The U.S. had a shortage of 4 to 7 million homes as of November 2023, according to an estimate from The Pew Charitable Trusts.
The average 30-year fixed-rate mortgage sat at 6.49% Thursday, well above when President Joe Biden took office and the rate was under 3%, according to the Federal Reserve Bank of St. Louis.
8.5% of US Homes are now worth over $1 million, the highest % on record. Five years ago less than 4% of homes were above $1 million and ten years ago less than 2%. pic.twitter.com/sczmFoCSas
— Charlie Bilello (@charliebilello) August 16, 2024
Economists are skeptical the surge in home prices will end anytime soon, with a June report from Bank of America (BofA) predicting home prices will rise a total of 4.5% throughout the course of 2024 and another 5.0% throughout 2025.
“We think it could take 6 to 8 years for the lock-in effect (dearth of transactions in existing homes) to go away,” the BofA analysts wrote. “The wide gap between current mortgage rates and effective mortgage rates means most homeowners are unwilling to move unless forced.”
Housing costs surged 5.1% year-over-year in July, accounting for nearly 90% of total inflation for the month.
Presumptive Democratic presidential nominee Kamala Harris is expected to speak on the housing shortage during the Friday roll-out of her economic plan. She intends to call for the construction of 3 million housing units and the enactment of tax incentives for builders who sell their properties to first-time homebuyers, according to Reuters.
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