A Million-Dollar Home Used To Be Considered a Mansion—Not Anymore

A "million-dollar home" used to conjure up images of a grand mansion with marble staircases. But these days, that seven-figure listing might well be a modest bungalow.

A new report from the National Association of Realtors® found that 8% of all owner-occupied homes—around 6.9 million homes in total—are now valued at $1 million or more.

That's a significant uptick compared to 20 years ago, when just 2% of homes were in the $1 million-or-more price range, and reflects the rapid pace of home price appreciation in recent years.

So what happened? Supply falling well short of demand, particularly in urban centers and on the coasts, has driven up prices exponentially.

The cumulative rate of overall inflation between 2000 and 2026 was 93.6%, meaning the typical item that cost $1 in 2000 now costs nearly $2. Home prices have risen even faster, surging more than 225% over the past 26 years, according to the Case-Shiller index.

That rapid appreciation means that a $1 million home today is roughly equivalent to a $308,000 home that was listed in the year 2000.

The trend is nowhere more apparent than in Hawaii, where around 40% of all homes are now valued at $1 million or more.

Consider this home in Mililani, HI, listed for $1,195,000, yet far from a palatial estate. The modest 1,040-square-foot property has three bedrooms, two bathrooms, and parking for two cars.

Around 31.3% of homes in California and 31.5% of homes in Washington, DC, are now also over the $1 million mark. Washington state, Massachusetts, and New York are all also at the higher end of the spectrum, with 17.4%, 15.5%, and 13.6% of homes valued at over $1 million, respectively.

But those numbers don't tell the whole story, the report found, because of price "bunching."

The psychology of price 'bunching' keeps buyers on the hook

Price bunching—the phenomenon of sellers listing their properties for just below the $1 million threshold—carries both practical and psychological import.

On a practical level, homeowners looking to avoid "mansion taxes" benefit from looking for homes priced below $1 million. In New Jersey and New York, mansion taxes kick in for homes over the $1 million threshold, adding an additional 1% to transfer taxes.

Other states, including Connecticut, Hawaii, and Vermont, and the city of Los Angeles have mansion taxes that kick in at various multimillion-dollar price points, while Washington state and DC have progressive mansion taxes that affect properties at lower price points. Those mansion taxes have a knock-on effect on the income required to purchase a $1 million home.

New York City also has a mansion tax that kicks in at exactly $1 million. It's calculated as a percentage of the full purchase price, making a home priced at $1,000,001 effectively cost thousands of dollars more than one purchased for $999,999

So it's no wonder that pricing houses at just below $1 million is a popular move. In New York City alone, Realtor.com® currently has 76 homes listed at exactly $999,999.

But there's also a psychological component to listing a home at just below $1 million—a false sense of affordability. The "left-digit effect" plays on the way that consumers read numbers from left to right, and tends to put the emphasis on the number at the far left of the price. That means that though $999,999 is essentially just a dollar off of a million-dollar price tag, the brain is fooled into thinking it's paying much less because the number begins with 9 instead of 1.

That approach has translated to greater sales for sellers willing to go just below the $1 million threshold. Since 2015, NAR has found that 2.4 times as many homes priced just below $1 million have sold as those priced just above it.

Eventually, as inflation compounds, most homes will cost $1 million or more—and hopefully, incomes will rise at a matching pace. NAR Chief Economist Lawrence Yun has estimated that the median U.S. home price will cross the $1 million mark around the year 2050.

Advice for buyers

So what can homebuyers take away from the glut of $1 million-plus homes on the market?

Well, for one, it's all relative. In Manhattan, for example, nearly half of owner-occupied homes are now worth at least $1 million, so buyers in that market should factor a mansion tax into the overall costs associated with purchasing in the borough. In Brooklyn, around 30% of all properties are at the $1 million threshold, giving buyers more potential leeway to avoid the tax.

Nadia Evangelou, principal economist and director of real estate research at NAR, advises buyers to evaluate the price of a home based on "comparable sales, not the number at the top of the listing."

She continues, "The $999,999 price tag often says more about marketing than value.

"The analysis highlights how local housing markets really are," she adds. "A million-dollar home may be relatively common in one state and very rare in another. Buyers should adjust their expectations to the local market instead of comparing prices across markets."

Her research found that in Iowa, Indiana, Kentucky, Louisiana, Nebraska, and Ohio, fewer than 2% of homes are worth at least $1 million, and in Mississippi, North Dakota, and West Virginia, only about 1% of owner-occupied homes meet the threshold.

In states that don't yet have a mansion tax, she says, "sometimes the best negotiation isn’t lowering the price."

Instead, "buyers may benefit more from asking the seller to cover closing costs or provide other concessions that can reduce the buyer’s costs while allowing the seller to keep the price where the seller wants it."

For buyers staring down a $1 million price tag in a state with a mansion tax, they would do well to consider how long a home has been on the market and factor that into offers.

"Buyers can use that as leverage by offering just below the threshold, particularly if the home has been on the market for some time," Evangelou says.