The housing market in the United States is currently experiencing a surge in the number of “million-dollar” cities, where the typical home is valued at $1 million or more. According to a recent analysis by Zillow, there are now 550 such cities in the country, an increase of 59 from the previous year. This surpasses the previous record of 522 million-dollar cities that was set in 2022. The primary reason for this increase is attributed to the mortgage lock-in effect, which has caused homeowners with low interest rates to hold back from listing their properties for sale. This limited supply has led to higher sale prices for the few homes that are available.
Skylar Olsen, chief economist at Zillow, explains that the interest rate lock-in effect has influenced sellers to delay listing their homes, leading to a scarcity of properties in certain markets. As a result, areas that historically catered to the wealthy have seen a surge in home values, making them million-dollar cities. Olsen also points out that sellers are just as sensitive to interest rates as buyers, which further exacerbates the limited supply of homes in these areas.
California leads the nation with the highest number of million-dollar cities, boasting a total of 210. This is 12 more than the previous year and more than the combined total of the next five states with the most million-dollar cities. However, not all regions have experienced growth in million-dollar cities. Some areas have lost their status due to a weaker lock-in effect caused by higher interest rates. In these places, more sellers are inclined to put their homes on the market, leading to an increase in housing supply.
States like Florida and Texas, known for their high-cost luxury markets, have seen fluctuations in the number of million-dollar cities. Florida lost three million-dollar cities, including Siesta Key, Santa Rosa Beach, and Sanibel, while Texas lost Sunset Valley and Volente, two areas near Austin. However, it is unclear whether this trend will continue in the future. Despite these losses, Florida still holds 32 million-dollar cities, while Texas has 14 as of February, according to Zillow data. Notably, Naples, Florida, is home to the most expensive property for sale in the U.S., priced at $295 million.
The rise and fall of million-dollar cities in the U.S. can be attributed to various factors, including the mortgage lock-in effect, interest rates, and regional disparities in housing market dynamics. While some areas have seen a surge in home values and the emergence of million-dollar cities, others have experienced a decline due to different market conditions. It is essential for homeowners, buyers, and investors to carefully monitor these trends and adapt their strategies accordingly in the ever-evolving real estate landscape.