The Rise and Fall of Million-Dollar Cities in the U.S.

The real estate market in the United States is seeing 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, which is an increase of 59 from the previous year. This phenomenon is largely attributed to the mortgage lock-in effect, which has discouraged homeowners with low-interest rates from selling their properties. As a result, the supply of homes in these areas is limited, leading to higher sale prices for the few properties that are available.

Skylar Olsen, the chief economist at Zillow, explains that the interest rate lock-in causes sellers to hold on to their properties, creating a scarcity in the market. This dynamic has had a significant impact on the housing prices in these million-dollar cities, making it difficult for potential buyers to find affordable homes in these areas.

California emerges as the state with the highest number of million-dollar cities, with 210 such areas. This is 12 more than the previous year and more than the combined total of the next five runner-up states: New York, New Jersey, Florida, Massachusetts, and Colorado. The concentration of million-dollar cities in California can be attributed to its historical appeal to the wealthy, making it a lucrative market for luxury real estate.

On the other hand, some areas have witnessed a decline in their million-dollar status. Locations where homeowners already have higher interest rates, between 6% and 7%, are not as affected by the lock-in effect. In these regions, there has been an increase in the supply of homes for sale, as more sellers are willing to list their properties on the market. For instance, Florida lost three million-dollar cities, including Siesta Key, Santa Rosa Beach, and Sanibel, while Texas lost Sunset Valley and Volente.

Despite the fluctuations in the number of million-dollar cities, it is challenging to determine if this trend will persist in the long run. Jacob Channel, a senior economist at LendingTree, suggests that the changes in the market may not necessarily indicate a definitive pattern. Florida and Texas, both states with a significant number of luxury real estate markets, continue to maintain their status as homes to high-cost million-dollar cities.

Overall, the rise and fall of million-dollar cities in the U.S. illustrate the complex interplay between economic factors, regional disparities, and market dynamics. As the real estate landscape continues to evolve, it is essential for investors, homeowners, and policymakers to closely monitor these trends and adapt to the changing market conditions accordingly.