Real estate shrinkflation: Million-dollar houses get smaller

Even million-dollar homebuyers, no longer a rarity in many cities as prices soared during the pandemic, are feeling the effects of “reduced inflation.”

Like the products on grocery store shelves that come in smaller packages to control prices as inflation rises, known as shrinkage inflation, the square footage of the nation’s million-dollar homes is falling, according to a report by Zillow, a national real estate website based in Seattle. .

While million-dollar home sales surged to new highs during the pandemic, more than doubling both nationally and in Houston, the average size of a $1 million home has shrunk in most markets, Zillow found. . Nationwide, homes that sold at or near the $1 million mark in 2022 were nearly 400 square feet smaller than those that sold at the peak of the 2020 pandemic. Put into perspective, those 400 square feet they are enough for a good-sized bedroom, a large closet and a bathroom.

“Buyers with seven-figure budgets who bought homes during the pandemic did so after the longest period of economic growth in US history and with the help of historically low interest rates,” said Anushna Prakash, analyst of economic data from Zillow. “Sales of expensive homes skyrocketed, while buyers in the heat of competition accepted smaller designs.”

In Houston, million-dollar homes are down 219 square feet or 5 percent from mid-2019, according to Zillow. The markets with the biggest declines were Phoenix, which dropped 1,116 square feet from 2019 to a total size of 2,933 square feet at midyear, and Nashville, where homes lost 1,019 square feet to a total of 3,181 square feet at midyear. .

The good news for Texans is that million-dollar homes, while smaller than those that sold three years ago, are still big compared to the rest of the county.

On HoustonChronicle.com: Houston home sales drop for fifth month in a row, but don’t expect bargain prices

The median size of a million-dollar home in Houston is 3,831 square feet, costing $261 per square foot, compared to 2,624 square feet nationally and costing $381 per square foot.

Sizes and prices are similar in Dallas-Fort Worth and San Antonio. In Austin, where home values ​​have risen 71 percent since mid-2019, buyers spent a median of $341 per square foot to get a 2,930-square-foot home in the second quarter of 2022.

Chris Newton, an agent with O’Hara & Company Real Estate in Houston, has seen a big change in what $1 million buys in suburban communities like Cypress. A couple of years ago, that amount of money meant a 5,000-square-foot custom home on an oversized lot in a gated neighborhood “with a tile roof and maybe a two-story closet and lots of upgrades.”

“It’s not unusual to have a 4,000-square-foot house that’s $1 million now,” Newton said. “The price per square foot has easily exceeded $200, especially in many nicer newer neighborhoods.”

The sales volume of homes over $1 million in Houston has more than doubled since mid-2019 to 1,215 in the second quarter, with nearly 250 of those sales hitting or close to the $1 million mark, according to Zillow.

Nationwide, homes sold for $1 million or more hit record volumes in the second quarter, rising to 90,110 from 43,421 in the second quarter of 2019, according to Zillow. The sales represented 6.4 percent of all single-family home sales nationally.

Houston followed the trend. Home sales of $1 million or more represented 3.7 percent of sales in the second quarter, compared to just 1.8 percent for the market in the second quarter of 2019.

Austin was second only to Portland, Oregon, in raising $1 million and sales, according to Zillow. More than one in 10 Austin buyers paid more than $1 million in the second quarter, as million-dollar home sales volume rose 220 percent from mid-2019.

Not surprisingly, California cities cornered the market for the most expensive small places. In San Jose, where homes over $1 million rose to 72 percent of sales, buyers could get a 1,399-square-foot home for $1 million. That works out to $715 per square foot.

San Francisco, where 62 percent of homes passed the $1 million mark, homes that cost $1 million contained a median of 1,636 square feet or $611 per square foot. Homes in Los Angeles were slightly larger at 1,644 square feet, while those in San Diego were 1,835 square feet.

Buyers stretched their money further in Hartford, Conn., where $1 million bought 4,873 sf.

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