Million-Dollar Homes Redefine Luxury Across America

The $1 million home is rapidly losing its status as a symbol of luxury in the United States, as years of sustained price appreciation have pushed millions of properties into seven-figure territory. The number of owner-occupied U.S. homes worth at least $1 million climbed from about 1.5 million in 2005 to 6.9 million in 2024, according to an analysis from the National Association of Realtors (NAR). Those homes now make up 8% of the market, up from just 2% two decades ago.

A Changing Definition of Luxury

The shift is most dramatic in high-cost coastal markets. About 40% of owner-occupied homes in Hawaii are now valued at $1 million or more, while roughly one-third of homes in California (31.3%) and Washington, D.C. (31.5%) have reached that threshold, according to NAR data. Washington state follows at 17.4%, ahead of Massachusetts (15.5%) and New York (13.6%).

By contrast, million-dollar homes account for only about 1% of properties in Mississippi, North Dakota, and West Virginia, with states such as Iowa, Indiana, Kentucky, Louisiana, Nebraska, and Ohio all remaining below 2%.

Billy Rose, co-founder and vice chairman of real estate brokerage The Agency, told Fox Business that the $1 million mark stopped representing true luxury in Los Angeles years ago.

“In L.A., it seems like there’s so much wealth here and there’s so much elevated housing that the million-dollar threshold now is truly entry,” Rose said. Some first-time buyers in the region now begin their searches at around $2.5 million or $3 million, he added.

The K-Shaped Housing Market

The changing definition of luxury reflects a broader “K-shaped economy” in which wealthy buyers benefit from stock market gains and greater financial flexibility, while lower-income buyers face pressure from elevated inflation, high mortgage rates, and economic uncertainty.

Recent Zillow data reveals the U.S. housing market is splitting in two. Luxury home sales grew 6.2% year over year in May 2026, while starter home sales fell 5.4%. Starter home inventory rose 4.5% year over year in June, while luxury home inventory fell 5.2%. Price cuts were also more common on starter homes, with 25% cutting prices in June compared to 20.6% of luxury listings.

“The best time to buy a home is when nobody else wants to,” said Kara Ng, senior economist at Zillow. “Starter home buyers today have more options, more negotiating power, and sellers who are more willing to deal. The challenge is that the same financial pressures making it harder to save for a down payment are also making it harder to take advantage of that opportunity.”

San Francisco shows the starkest divergence. Luxury home sales across the metro area surged 21.6% year over year in May, while starter home sales slipped 1.2%.

“It’s creating a larger divide between, you know, the haves and the have-nots,” Rose said.

AI’s Role in Housing Inequality

The AI boom has created a new class of millionaires and billionaires concentrated in tech hubs like the Bay Area, driving up luxury home prices while lower-end properties stagnate or decline. According to a Fortune report, since ChatGPT’s launch in November 2022, luxury home prices in the Bay Area—classified as those selling between $3.1 and $7.6 million—have jumped 13.4%. At the same time, home values for lower-end properties ($535,000 to $615,000) have fallen 3.8%.

“Some owners of lower-end properties have missed out on the AI boom, with home prices in the most affordable Bay Area zip codes declining over the past two years,” said Yingqi Xu, Redfin senior economist. “It’s another sign of the K-shaped economy taking shape in the Bay Area, with AI lifting the fortunes of some households and neighborhoods much more than others.”

The median home sale price in the San Francisco metro area rose 14.4% year over year in March 2026 to a record $1.7 million, according to Redfin.

“There are lots of people who have gotten very rich off of AI,” said Daryl Fairweather, Redfin chief economist. “At the same time, salaried white-collar workers are feeling the strain of the economy, worry[ing] that AI is going to replace them.”

Policy Stagnation and the Mansion Tax

The $1 million threshold also shapes buyer behavior in unexpected ways. Since 2015, about 2.4 times more homes have sold just below $1 million than just above it, according to NAR—a phenomenon economists call “bunching.” Buyers may set searches below round numbers, face different mortgage requirements, or encounter taxes that begin at $1 million.

New York’s mansion tax is a prime example. The tax has applied to purchases of $1 million or more since 1989, even though that amount would equal about $2.7 million today after adjusting for inflation. The 1% tax adds $10,000 to the purchase of a $1 million home. Nearly half of owner-occupied homes in Manhattan (48.2%) are now worth at least $1 million, and in Brooklyn, more than one-third (35.1%) have reached that level.

“I think you need to be looking at whether those thresholds need to increase and be more keeping with the times,” Rose said.

NAR’s analysis also highlights a “triple lock-in effect”—mortgage lock-in, capital gains lock-in, and transfer tax lock-in—that reduces homeowner mobility. About 13.1 million homeowners have capital gains that exceed the current federal exclusion, creating a financial incentive to stay put.

A Global Phenomenon

The changing definition of luxury is not limited to the U.S. According to The Agency’s 2026 Red Paper, in markets near Toronto, 1 million Canadian dollars (about $731,000) no longer buys true luxury. Steve Bailey, Managing Partner of The Agency in Canada, noted that luxury properties generally begin closer to 1.7 million to 3 million Canadian dollars.

“Inventory in Canada is the opposite of the U.S., with more luxury homes available now than in 2019,” Bailey said. “In Canada, our mortgages have terms of five years, so even if you have a 25-year loan, you need to renew it every five years.”

In Madrid, the luxury threshold has risen dramatically. “Our luxury threshold used to be €800,000 to €1 million (about US$935,000 to US$1.17 million), but now luxury costs €3 million (about US$3.5 million),” said Patricio Guzman, a manager with The Agency Madrid.

What’s Next

Nationally, the threshold for luxury homes was $1.2 million in April 2026, according to Realtor.com. The typical luxury home is now worth about $1.9 million, up 3.1% from a year ago, while the typical starter home is worth about $202,000, up just 2.3%.

Ultra-luxury home sales (over $10 million) in top 10 U.S. markets jumped 32% year-over-year, with 1,600 transactions totaling almost $29 billion, according to a Compass year-end report. Los Angeles ultra-luxury sales were up 54% year-over-year with 292 homes sold at $10 million plus.

As the housing market continues to diverge, the question of what constitutes “luxury” will only grow more complex. With home equity rising 142% since 2020 and 31% of Americans now considered upper middle class—compared with 10% in 1979—the million-dollar home may soon be seen not as a luxury at all, but as the new normal in America’s most desirable markets.

Watch Billy Rose discuss the changing definition of luxury in Los Angeles real estate in this Fox Business video.