Million Dollar Plus Houses Soar In Numbers, And Are Now The Fastest Growing Segment Of All U.S. Houses
by Kenneth R. Harney
What's the fastest-growing segment of the home real estate market nationwide? Think luxury. Think big. And in some communities, think ... well, kind of ordinary. Million dollar homes have exploded in numbers by 150-180 percent in the past 10 years, more than seven times the growth rate of housing units in the rest of the marketplace. In a first of its kind national study, Harvard University's Joint Center for Housing says that though once a rarity in many markets, million dollar plus home are now routine in a growing number of metropolitan markets around the country. Researcher Zhu Xiao Di found that Harvard's hometown of Cambridge, Mass., now has the distinction of having the highest concentration of million dollar homes of any city with 100,000 or higher population. One out of every eight Cambridge houses is valued at $1 million or more, compared with one out of every 14 in second place San Fancisco, and one out of 25 for third place Los Angeles. Both San Franciso and LA, of course, have far larger total numbers of million dollar-plus units than Cambridge -- 15,500 in LA and 5,500 in San Francisco versus 516 in Cambridge. Among the states, California ranks first in the million dollar bracket (2.33 percent of its entire housing stock), closely followed, surprisingly, by the District of Columbia (2.03 percent of its stock). For statistical purposes, federal data gathers treat DC as a state. Connecticut ranks third in million dollar houses (1.91 percent of stock), Hawaii is next (1.42 percent) and Massachusetts is fifth with 0.85 percent. The new study uses both Census and Federal Reserve data to examine the fast-growing million dollar home phenomenon. It found that owners of these upper bracket properties are not financially squeezed or pressured by their luxurious dwellings. To the contrary, researchers suggest that "expensive houses are actually quite 'affordable' to their owners because the owners have relatively much higher incomes compared to lower income homeowners." Owners of million dollar plus houses have a median annual household income of about one third the market value of their residences, whereas homeowners with lower incomes have annual household incomes less than one-sixth of the value of their properties. Million dollar homeowners are overwhelmingly white. One out of every 72 white homeowners in the U.S. owns a million dollar plus home, according to the study. That compares with one out of every 762 minority homeowners who own such high cost dwellings. One out of every 17 white homeowners -- nearly 20 percent -- owns a principal residence worth $500,000 or higher. Most million dollar homes are owned by individuals aged 45 to 64 -- no surprise there. But the sheer total household wealth of this segment of the population is dramatically disproportionate to their numbers. Though they represent just 0.8 percent of all households in the U.S., owners of million dollar and up homes "control 18 percent of all household net wealth," according to the study. Owners of half-million dollar and higher homes account for 3.7 percent of all households, but control 39 percent of all household wealth in the country. According to the study, the average million dollar-plus home is worth $1.73 million, and the median home -- halfway between the priciest and the lowest -- is worth $1.4 million. In California, million dollar plus price tags do not necessarily connote super-sized luxury. The median size of the million dollar house sold in California in 2002, says the study, was not huge by national standards -- just 2,875 square feet, with four bedrooms and three baths. The concentration of million dollar houses in some California communities -- Rancho Santa Fe, for example -- is so heavy that a true $1,000,000 home "may look ordinary," said the researchers, and qualify as nothing more special than "entry level." Why the tsunami surge in the million dollar-plus category? The Harvard study suggests that a key part of the phenomenon has been the "rapid growth of household wealth in this country and the widening gap between wealthy and poor." A second major reason has been the extraordinary inflation in home values experienced during the past decade, where many homes have doubled or tripled in value, pushing them into the once-exclusive and tony seven figure brackets. (The study can be viewed online by clicking here.) | 
