Shrinkflation has come for houses, too—even those with $1 million listing prices.
As housing prices continue to rise, more properties have graduated to the million-dollar club. This explains (in part) why sales at this price point have gone up. It also helps explain why the typical $1 million home in 2022 looks different from its 2019 counterpart.
This year’s $1 million homes are smaller, older, and have fewer bathrooms. As with inflation in other sectors, buyers are spending more (or the same) and getting less.
Sales of $1 million homes are increasing
Home sales at the million dollar mark have more than doubled since 2019. And they’re still on the rise.
The second quarter of 2019 saw 43,421 sales of homes priced at $1 million plus; that number grew to 90,110—a record volume—in the same quarter of 2022.
Put another way, the share of single-family homes selling for $1 million or more has grown from 2.7% in the second quarter of 2019 to 6.4% in Q2 2022.
Part of the reason for this is rising home costs across the board. More homes that cost under $1 million pre-pandemic have joined the ranks. Homes priced at $1 million or more now represent a larger share of the total market.
Another factor behind the growth in sales for these homes is homebuyers with the means to buy them are less sensitive to rising prices.
Some metros saw bigger increases than others. In Portland, Oregon, million-plus sales jumped by 253% since mid-2019. Austin, where home values are already up 71%, saw a 220% bump in $1 million plus home sales.
The only metro that saw a decline in the number of home sales at this price point was Boston, where the share of $1 million homes dropped by 32%. The comparatively low home appreciation in Boston and other major East Coast metros is a big reason for that.
A higher price for a smaller home
Homes at the $1 million price point may be selling in greater numbers, but they’re also getting smaller. According to floor plan data for Zillow listings, homes at that price point have shrunk by nearly 500 square feet compared to 2019.
Median square footage for these homes peaked at 3,021 in the middle of 2020, then dipped to a low of 2,530 early in 2022 before bouncing back up to 2,624 square feet—down 397 from the 2020 peak and a 9.5% drop from three years prior.
Phoenix and Nashville saw the biggest drops in square footage. Phoenix saw a drop of 1,116 square feet from 2019 to 2022, while Nashville homes lost 1,019.
Only two major metros saw increases in square footage: Minneapolis gained 36 square feet (about enough for a closet), while St. Louis gained 406.
When cutting square footage from the house plans for these $1 million+ homes, bathrooms were the first to go. Only four metros observed in Zillow’s study kept the same number of bathrooms compared to 2019.
Median home age has gone up
The typical $1 million home in 2022 is also older than its counterpart in 2019.
The typical million-dollar home in Raleigh, NC was built 15 years prior, making them the youngest at this price point. Behind Raleigh, other Southern and Midwestern metros top the list for markets with the youngest million-dollar homes—mainly because they have more space for new construction.
The oldest homes are in the far-denser metros of the Northeast and California. The typical million-dollar home in Providence, RI and New York is close to the age of retirement.
Top takeaways for real estate agents
According to recent Zillow research, home sales in the top third of the million-dollar housing market may be slowing faster, while demand for homes in the bottom third remains strong.
If you’re helping sellers in that price range list their homes—or buyers of similar means—this is something to keep in mind.
Stay on top of any data that could help your clients better understand the market so they can avoid buyer’s (or seller’s) remorse down the road.