A $1 million house in Southern California comes with 25% less space than the national norm for that price — plus, it has one less bathroom and bedroom.
As million-dollar price tags have moved from luxury homes to more mainstream purchases, even well-heeled buyers are battling the region’s housing affordability challenges. With the help of researchers at Zillow and my trusty spreadsheet, we can see a clear value gap for local buyers who paid between $950,000 and $1.05 million for a single-family residence in 2022’s first three months.
Yes, I know few folks will have great sympathy for those who can dream of spending seven figures on a house. But in the four-county Southern California region, a typical $1 million home came with a median 1,887 square feet vs. 2,528 nationally. That’s no mansion and its one-quarter less living space than what the typical U.S. buyer got for the same price.
In those smaller quarters, $1 million buyers got three bedrooms instead of four nationally, and two bathrooms vs. three. Local buyers also got older homes for $1 million, too: In Southern California homes run 53 years old vs. 32 years for U.S. buyers.
Not just California
Spending $1 million or more apparently isn’t a huge barrier, here or in the nation.
Total Southern California house sales priced at $1 million and above were 23% of the first-quarter market. For the U.S., 8% of homes sold for seven-figures.
Home prices have been boosted by a host of factors.
Working and schooling at home, designed to stem the spread of coronavirus, created a need for larger living spaces. Pandemic fears also nudged many homeowners not to sell their homes.
Historically low mortgage rates used to boost the broad economy in the pandemic era made a $1 million price far more digestible.
The monthly payment on an $800,000 mortgage — I’m assuming a house hunter somehow has a $200,0000 downpayment — fell by 20% to $3,236 between the start of 2019 and the end of 2020. In 2022, as the Federal Reserve ended its cheap money policies in an attempt to cool an overheated economy, rising rates pushed this same payment up to $4,408.
Another big driver of the seven-figure house was a surge in incomes — both from pandemic stimulus efforts as well as bosses paying to attract and keep employees as the worker shortage intensified.
The days of checks from the government may be gone, but fatter paychecks make outsized monthly mortgage payments viable for some households.
And don’t overlook the impact of real estate investors whose frequent all-cash offers fueled home-price inflation. What might they do next?
Inland bargains
What a buyer gets for $1 million varies wildly around Southern California — and it follows a long-running theme: the farther from the coast, the more (and newer) houses you get.
Los Angeles County buyers got the smallest house for $1 million at 1,684 square feet — 33% smaller than the U.S. average — for 3 bedrooms and 2 bathrooms in a 63 year-old-home. Sales of $1 million and above were 30% of the market.
In Orange County, $1 million bought 1,687 square feet — 33% smaller than the national benchmark — with 3 bedrooms and 2 bathrooms in a 52 year-old-home. Sales of $1 million and above were 45% of the market.
The inland “bargain” was Riverside County, where $1 million got 3,032 square feet — 20% larger than the typical U.S. purchase. For $1 million, buyers got 4 bedrooms and 3 bathrooms, in a 19 year-old-home. Sales of $1 million and above were 8% of the market.
And in San Bernardino County, $1 million bought 2,582 square feet — 2% larger than average — with 4 bedrooms and 3 bathrooms, in a 33 year-old-home. Sales of $1 million and above were 5% of the market.
Statewide split
This homebuying gap isn’t just a Southern California pattern.
Consider that 10 California metropolitan areas had 30 or more sales near $1 million in the first quarter while there were just 47 in the rest of the nation. Please note the coastal vs. inland split.
Near the Pacific Ocean, $1 million got a California buyer roughly 1,725 square feet with 3 bedrooms and 2 bathrooms in a 54 year-old-home. These are markets where 38% of homes sell for $1 million or more.
But go house hunting inland — metros encompassing Riverside, San Bernardino, Sacramento, San Joaquin, El Dorado, Placer and Yolo counties — and $1 million snagged 2,786 square feet with 4 bedrooms and 3 bathrooms in a 22 year-old-home. Only 7% of homes in these communities sold at $1 million or above.
Still, even for folks who can afford to pay $1 million — that’s significant added value inland.
And these kinds of housing savings help explain why inland metros added 19,000 residents last year vs. a loss of 137,000 in the rest of the state.
‘Bargains’ elsewhere
If you’re looking to spend $1 million outside of the Golden State — or just curious about cost differences — you’ll find another constant nationwide: real estate “bargains” aren’t usually close to the ocean.
So, here’s where you get the most for your million among the 47 non-California metro areas with significant high-end markets …
Want 4,000 or more square feet? Try Minneapolis-St. Paul, Virginia Beach, Va., Atlanta, Colorado Springs, Colo., or Provo, Utah.
Five bedrooms? It’s most common in Salt Lake City and Provo, Baltimore, Atlanta, or Colorado Springs.
Four bathrooms? Look in Myrtle Beach, S.C., Orlando, Fla., Charlotte or Raleigh, N.C., Virginia Beach, Atlanta, Colorado Springs, Baltimore or Detroit.
Or a “newer” house, say, under 15 years? Head to Prescott, Ariz., Boise, Idaho, Charlotte or Provo.
Jonathan Lansner is the business columnist for the Southern California News Group. He can be reached at jlansner@scng.com
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