Owners of “million-dollar” houses represent nearly one-fifth of all household wealth in the United States, and two-fifths of this country’s household net wealth is in the hands of the owners of “half-million-dollar-plus” houses, according to a new study released by Harvard’s Joint Center for Housing Studies.
These homeowners also represent half of the business wealth in the household wealth portfolio. The director of the Joint Center, Nicolas P. Retsinas, remarked, “The rise in the number and the value of ‘million-dollar’ homes in the United States reveals the widening disparities between the housing-haves and the housing have-nots. Ironically, in the midst of a shortage of affordable housing, ‘million-dollar’ homes have become increasingly common.”
“Million-dollar” and “half-million-dollar-plus” houses were a rapidly growing segment of housing markets during the 1990s. The increase comes from a combination of the quality of homes built in the last decade and the rising value of existing homes. “The driving forces for the increase are the rapid growth of household wealth and income among a few million households and the escalation of existing-home values ahead of income growth, especially in California and Northeast markets with tight housing supplies,” said Zhu Xiao Di, research analyst at the Joint Center.
Because of the widening gap in household income and wealth between the rich and the poor, “million-dollar” houses are actually quite “affordable” to their owners. While homes of low-income households cost more than six times their annual household income, “million-dollar” homes cost their owners on average only three times their income. On average, “million-dollar” houses are worth $1.73 million each with half of them worth $1.4 million or more. A quarter of them have a market value of about $1 million, and at least a quarter of them are worth more than $2 million.
Ownership of such expensive homes is concentrated among non-Hispanic whites. The study shows that while every 1 of 72 white homeowners has a “million-dollar” house, only 1 out of 762 minority homeowners owns such an expensive house. As for “half-million-dollar-plus” houses, 1 out of 17 white homeowners owns one, but only 1 out of 33 minority homeowners has such a house. Otherwise stated, minorities own 16.5 percent of all homes, but only 1.8 percent of “million-dollar” homes.
Harvard’s Joint Center for Housing Studies is a center for information and research on housing in the United States.
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