Million Dollar Homes: Still Special For Many
The idea of a million dollar home once suggested grandeur, glamour and most of all a big house on an equally spacious parcel of land or a fabulous apartment with a great view in the city.
Though a property of that sort is still nothing to sneeze at, in many towns and neighborhoods you'd find morre than a few.
So when people say, a million dollars isn't what it used to be, it is no doubt partly because of the usual effects of inflation, but two decades of virtually uninterrupted price appreciation -- in some cases, amplified by a housing shortage or speculative bubble -- has had an equally powerful impact.
In parts of the Northeast and California, a million dollars might buy you a property with four, maybe five bedrooms; two baths, a family room with a fireplace and a modest piece of land. In many other parts of the country, a million dollars will buy you two or three of them.
In Manhattan, the million-dollar threshold for a coop or condo was breached in 2004 and, like the skyline, prices kept rising through 2006.
"People went through a couple years of sticker shock," says MaryJo Palumbo Taubner, a veteran New York City agent and VP in one of Prudential Douglas Elliman's Manhattan offices. In many neighborhoods, she says, "there are no million dollar, two-bedroom coops."
The median sales price of a two bedroom coop in Manhattan hit $1.272,000 in 2006, triple what it cost in 1997, according to data from the company, one of the largest in the U.S.
"In the past, the million dollar home was the last one you bought in Manhattan, you raised your family in it," says Palumbo Taubner. "Now it’s a stepping stone."
The market definitely softened in the latter half of 2006 -- a year when prices rose 21.6% --and that trend continued into the new year, but no more. "Prices are going back up, " says Palumbo Taubner, who's not "expecting any softening at this point."
And that, err, is the million dollar question for many buyers in the spring of 2007. Has the market bottomed out? If so, how much more will a million dollars buy you today then, say, a year ago, before the fall?
Million dollar homes are a very segment of the overall market -- about 2% of all transactions -- according to the National Association of Realtors. The highest concentration – no surprise -- is in California.
Nationwide, the median price of an existing home went from $129,000 in 1997 to $221,900 in 2006, according to the real estate trade group.
Indeed, when it comes to statistics, million dollar homes are hard to find. That’s not to say that in certain towns in the nation – Alpine, New Jersey and Los Gatos, California to name a couple on opposite coasts – a $1,000,000 is the virtually the minimum price for entry.
Most Expensive Markets
Based on its Q4 2006 survey of existing homes in major metro areas, San Jose topped the list with a media price of $760,000. That's a 4.4% discount compared to the $795.000 median price of the second quarter of 2006. (Given overall trends, Q1 2007 data -- due out in mid-May -- is likely to show further depreciation in most markets.)
San Francisco ranks second and is much the same at $733.000, vs. $752,000.
In the $600,000 bracket, Anaheim-Santa Ana (Orange Co.) came in at $690,700 (down from $726,200 earlier in the year) . Honolulu, Hawaii at $620,000 ($640,000 in Q2), was the only only entry.
Three areas in the New-York-New Jersey-Pennsylvania region came led the next tier, but the extent of price declines has varied widely at $498,444 vs. 540,200,, 473,700 vs. $478,000 and $464,000 vs. $473,700.
Even with the considerable price differences from one market to the next as well as the various regions regions in the country, the idea of a million dollar home "doesn't mean the same thing, doesn't have the same pizzazz," says Stephen Melman, director of economic services at the national Association of Homebuilders.
The group doesn't track million dollar home per say. 'We define it it terms of size, not price," says Melman. The trade group does have a category of homes called "upscale", which means 4,000 square feet or more. That category is also distinguished by such non-standard amenities as outdoor kitchens and full pantries.
Still, based on Commerce Dept data, only 6% of the homes sold during 2006 were priced at $750,000 or more. The Northeast region was tops 14%. The data has no bracket for $1,000,000 or more.
Overall, new homes, which are generally pricier, had a median sales price of $254,000 in March. The average price was $330,900, vs. $26,600 in 1970 and $76,400 in 1980.
Luxury homebuilder Toll Brothers recorded 1,094 contracts for million-dollar homes last year, which was 18% of the total. In 2001, that category was a 152 homes, or 4%. In 1997, "It was under a handful" says Frederick N. Cooper, VP for finance and investor relations. The house generally run from 3,000 to 5,000 square feet.
Cooper is quick to acknowledge the inflation effect, but says the growth is the result of "a variety of things." Toll has grown dramatically as a company but it has also been "introducing more, higher-end homes."
Then take the example of Hovnanian Enterprises, a builder whose homes span the range of the market. In 2006, the company delivered 20,201 homes. The highest price was $2.2 million and the lowest was $42,000. The average was $329.000. In 2000, the top was $1.4 million, the bottom was $37,000 and the average was $257,000. Then again, in several of the recent boom years, Hovnanian didn't deliver one million-dollar home, says Jeff O'Keefe, the company's director of investor relations.
Suffice it to say, like all things real estate, it is location, location, location -- and in many markets, a million dollars still goes a long way
The bottom of NAR's metro list includes metro areas in Ohio, Indiana and Illinois -- and all under $100,000.
Melman of the realtors group takes a more practical view of the market, million dollar home or not. "The price may be higher, but you're also getting a better product."