What Effect did the Pandemic Have on Million Dollar Homes?

Even though the sales volume of $1-million homes has gone up as much as twice that in 2019, as per Zillow analysis, the properties sold are about 500 square feet smaller than they were before the pandemic in this price range.

The fact is the size of properties is getting smaller especially when it comes to luxury properties costing around $1 million. In fact, according to Zillow listing data, properties have contracted by a whopping 500 square feet at the same price point ($1 million). This can be partially attributed to the sudden surge in the number of home buyers during the pandemic.

The U.S. experienced the longest period of a thriving economy till the pandemic hit in 2020. And this has fuelled the sales of luxury homes. This, in combination with historically low-interest rates, has further increased the competition between the buyers. When the demand for luxury homes soared, buyers had to settle for smaller homes thanks to the cut-throat competition.

For the uninitiated, $1 million are essentially single-family homes with costs ranging from $950,000 to $1,050,000. In this study, Zillow analysts have only included metropolitan areas that have at least 30 sales of these luxury homes.

According to analysts at Zillow, the area of an average $1 million home sold during this period has contracted in almost every major area in 2022. In Phoenix, the home size was reduced by 1,116 sq. ft. from 2019 while in Nashville, the area of sold properties shrank by nearly 1, 1019 sq. ft. from 2019). Floor plans increased in only two metros. In Minneapolis, they grew by 36 sq. ft. And, in St. Louis, they have increased by 406 sq. ft.

Though the home sizes have decreased significantly, the sales volume of $ 1 million homes has gone up by 46, 689 (from nearly 43,421 in 2019 to the record level of 90,110 in the second quarter of 2022). Since home prices have soared massively all over the country during the Covid 19 pandemic, this price range accommodated a larger chunk of total homes sold. As a result, the share of $ 1 million single-family homes rose from 2.7% in 2019 to 6.4% in 2022.

As far as the sales volume goes, Oregon and Portland have led the pack. These metros have experienced a surge of nearly 253% in sales volume. Texas and Austin have also experienced a jump of around 220% in sales volume of homes costing around $1 million and more. There is one major metro, however, that experienced a decline in the sale of luxury, single-family homes by around 32% from 2019.

When it comes to price per square foot, San Jose, California is the leading metro with a price of around $715 per sq. ft. On the other hand, the price per sq. ft. in Hartford, Connecticut was the lowest at $205 per sq. ft. Additionally, the prices have experienced a decline in many Midwestern metros such as Cincinnati, Oklahoma City, Kansas City, and Indianapolis.

While it’s true that the sales volume of homes worth $1 million or more is higher, if you take into the overall sales pace of these homes, it has considerably slowed down in recent months, probably due to the decreasing affordability for many homeowners. As per another Zillow analysis, thanks to more affordability challenges, the competition has shifted from luxury homes to more affordable properties. Zillow has reported that low-cost homes have experienced a much lesser severe dip during most of the pandemic period and this segment has been bouncing back faster than high-tier homes.
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