Millionaires row no more: Number of houses that cost seven figures nationwide is dropping

As mortgage rates continue their upward march, the share of U.S. homes worth seven figures is dropping.

In another indication of the cooling housing market, homes that would have been worth $1 million or more at the peak of the pandemic homebuying frenzy are now languishing at a lower price tier, according to a new analysis by Redfin.

In January, homes valued at $1 million or above fell to 7% compared to 8.6% last June at the peak of the market. However, they still makeup a bigger share of the pie compared to January 2020, just the before then pandemic, when a little over 4% of the homes were in the $1 million range.

Keep in mind, these numbers are not based on homes that are listed for sale, but rather what they are worth.

Housing market rising? Housing market on the rise? Why pending contracts for home sales have industry buzzing.

Cheap rent, but…: How you can get cheap rent, but it comes with a ‘bump’ notice. What it’s like living on ‘Standby’

“In other words, this is what we think the home would sell for if the owner did decide to list it,” Angela Cherry, the director of communications at Redfin told USA TODAY.

To calculate current values (January 2023), the Redfin Housing Value Index uses the Redfin Estimate, which is available in most but not all parts of the U.S.

To calculate historical values, it uses public records and MLS data on price-per-square-foot trends by zip code (or city, county, or state when zip code data is insufficient). The Redfin Home Value Index includes both existing homes and new-construction homes, and dates back to the year 2000. Homes are not added to the index until they are first built or sold.

The share of homes worth at least $1 million was calculated using these raw numbers: 6,203,954 homes were worth at least $1 million in January 2023, compared with 7,458,031 in June 2022 and 6,030,177 in January 2022, Redfin told USA TODAY.

U.S. Homeowners lost $2.3 trillion in home value

The total value of U.S. homes was $45.3 trillion at the end of 2022, down 5% ($2.3 trillion) from a record high of $47.7 trillion in June.

That’s the largest June-to-December drop in percentage terms since 2008, according to Redfin.

While the total value of U.S. homes was up 6.5% from a year earlier in December, that’s the smallest year-over-year increase during any month since August 2020.

Home values have dropped from record highs as 6.5%-plus mortgage rates dampen homebuying demand. That has pushed a certain portion of homes that would have been worth seven figures at the peak of the pandemic homebuying frenzy below the million-dollar threshold.

Some of the decline from the June peak is due to seasonality, as home prices typically decline in the second half of the year, but the June-to-January drop noted in this report is much bigger than usual, the report notes.

U.S. homebuyers are not catching a break

While home values are coming down from their peak and fewer sellers can command seven figures, that doesn’t mean buyers are getting a break, said Redfin Economics Research Lead Chen Zhao.

“The typical homebuyer’s monthly mortgage payment is even higher than it was when home values peaked in the spring,” says Chao. Buying an $800,000 home today would cost more per month than buying a $1 million home a year ago.”

With today’s 6.6% mortgage rates, a buyer who made a 20% down payment would pay $5,241 for an $800,000 home. With the 3.5% rates common in early 2022, that same buyer would pay $5,034 per month for a $1 million home.

The portion of U.S. homes worth seven figures has nearly doubled since before the pandemic, and the typical home is worth significantly more. That’s due mostly to home prices soaring as demand skyrocketed during the pandemic and partly to the general uptick in home values over time.

Where are homes valued at million dollars going down?

The share of homes valued at seven figures is falling quickest in the Bay Area and other expensive coastal areas as the overall housing market cools. Just over 80% of San Francisco homes are worth at least $1 million, down from 86% a year ago.

Oakland, California, where 45% of homes are worth $1 million or more, down from 50% a year ago, experienced the next-biggest decline. It’s followed by Seattle (27%, down from 31%), New York (29%, down from 32%) and San Jose, California (79%, down from 82%).

Florida is a big winner in home value appreciation

Those out-of-town remote workers moving from more expensive parts of the country have boosted up property values in the Sunshine State.

Five of the nation’s 10 most popular migration destinations are in Florida, despite its status as the most hurricane-prone state in the U.S.

Roughly 14 of Miami homes are worth at least $1 million, up from 11.5% a year ago, the biggest increase of the metros in this analysis. The next-biggest upticks are in North Port, Florida (11%, up from 9%), Anaheim, California (54%, up from 52%), Nashville (8%, up from 6%) and West Palm Beach, Florida (13%, up from 11%).

Florida was home to six of the 10 metros with the biggest home-value increases last year, and Miami, North Port and West Palm Beach all saw 5%-plus annual price increases in January.

Swapna Venugopal Ramaswamy is a housing and economy correspondent for USA TODAY.  You can follow her on Twitter @SwapnaVenugopal and sign up for our Daily Money newsletter here.

This article originally appeared on USA TODAY: Number of million dollar homes in US is shrinking amid cooling market