The U.S. has a record-high number of cities where typical home prices have surged past the $1 million mark.
There are 550 so-called “million-dollar” cities in America, up from 491 one year ago, a new report by online real-estate listing site Zillow found. High mortgage rates, low stock of available homes, and inflation have pushed up the cost of home buying in the past year.
More than one-third of cities where typical home prices come in at $1 million and above can be found in California — home to 210 such cities. The state welcomed 12 new million-dollar cities in the past year.
New York has the second-largest number of million-dollar cities with 66, also gaining 12 since last year. New York City’s metropolitan area, including parts of New Jersey and Pennsylvania, has the most million-dollar cities with 106 — 24 more than a year ago.
New Jersey has the third-highest with 49, and was the state to add the most million-dollar cities over the past year. On the other hand, Florida, Texas, and Delaware were the only states to see a net loss in million-dollar cities over the past year.
And while not everyone wants to live in one of these million-dollar cities, prospective homebuyers across the country are looking at one of the toughest housing markets in recent years. Median home values have risen at a rate that has outpaced inflation: In February, U.S. home prices climbed 6.4% compared with last year, selling for a median price of $412,227, according to Redfin. Meanwhile, annual inflation came in at 3.2% and real wages grew just 1.1% year-over-year.
Read more: It now takes a six-figure income to buy a house in almost half of America
Mortgage rates have also stayed well above pre-pandemic levels as a result of the Federal Reserve bank’s inflation-fighting campaign, which has left interest rates at a 23-year-high of between 5.25% and 5.5%. The average rate on a 30-year fixed mortgage fell slightly to 7.01% — still nearly double what it was just five years ago, according to Bankrate’s weekly national survey of large lenders.
This has all had a serious impact on home buying. Several recent studies have shown just how the current market conditions have changed the way prospective homebuyers are approaching the market. In all 50 U.S. major metropolitan areas, for example, it is now cheaper to rent than to buy a home, a recent Realtor.com report found.
But there is a light at the end of the tunnel. Both Redfin and Zillow predicted that home prices will fall by the end of 2024 and that housing inventory will begin to inch up, reversing the trends we’ve seen over the past few years. But if the Fed decides to lower interest rates sometime this year, as it is heavily expected to, mortgage rates will follow — and that could send demand, and prices, soaring.