Once rare, they're now a fast-growing segment of the housing market.
Million-dollar homes have become one of the most studied segments of the U.S. housing market. Where are they? Who owns them? What's in them? A new study by the Joint Center for Housing Studies at Harvard University that draws on Census Bureau data, the Federal Reserve's Survey of Consumer Finances and industry surveys sheds light on these questions.
Where Million-Dollar Homes Are
Five California cities - San Francisco, Pasadena, Los Angeles, Berkeley and Fremont - make the list of the 10 cities (minimum population: 100,000) with the highest concentration of owner-occupied single-family homes valued at $1 million or more. Of the million-dollar homes counted in the 2000 census, nearly 5% are in Los Angeles. Other cities cracking the top 10 include Atlanta; Cambridge, Mass.; and Honolulu. Not surprisingly, 2000 census data puts California atop of the list of the 10 states (plus the District of Columbia) with the highest share of million-dollar homes.
According to Census Bureau data on sales prices of new homes sold, 32,000 of the 908,000 sold in 2001 are worth $500,000 or more. Of the 973,000 sold in 2002, 43,000 fall into that category. During the first three quarters of 2003, 51,000 of the 843,000 new homes sold fetched at least $500,000 apiece.
Who Owns Million-Dollar Homes
The average annual household income of people who owned a million-dollar home in 2001 topped $900,000, according to Federal Reserve data. Thirty-two percent of them have no outstanding mortgage loans. For those who do, the median loan amount is $400,000.
Many buyers of million-dollar houses pay cash. A Coldwell Banker survey of its 200 Realtors who sold at least one million-dollar home during the past year found that 31% of the buyers who paid at least $1 million for a home paid entirely in cash. Among those who took out loans, 17% paid half of the sales price upfront.
The average age of million-dollar homeowners tops that of homeowners in general. The Fed found in the Survey of Consumer Finances that most million-dollar buyers are 45 to 64 years old. In addition, SCF data show that million-dollar homeowners control 18% of all household net wealth, primarily made up of stock and business wealth. Coldwell Banker's survey found that entrepreneur and corporate executive are the most common job descriptions for million-dollar homeowners.
What's in a Million-Dollar House
According to the Coldwell Banker survey, 49% of million-dollar homes sold ranged from 4,000 to 6,000 square feet. The majority have four to five bedrooms. However, owners of million-dollar homes aren't buying only space. Materials, beautifully crafted spaces and, most important, location establish value for these buyers.