Even million-dollar home buyers, who are no longer a rarity in many cities as prices zoomed during the pandemic, are feeling the pinch of “shrinkflation.”
Similar to products on grocery store shelves that come in smaller packages to control prices as inflation rises — dubbed shrinkflation — 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 sales of million-dollar homes surged to new highs during the pandemic, more than doubling both nationally and in Houston, the median size of a $1 million home shrank in most markets, Zillow found. Nationally, homes that sold at or near the $1 million mark in 2022 were nearly 400 square feet smaller than those that sold at the 2020 pandemic peak. Put in perspective, that 400 square feet is enough for a nice size bedroom, spacious closet and bath suite.
“Buyers with seven-figure budgets shopping for homes during the pandemic were doing so coming off the longest period of economic growth in U.S. history and with the help of historically low interest rates,” said Anushna Prakash, economic data analyst at Zillow. “Sales for expensive homes soared while buyers in the heat of competition accepted smaller layouts.”
In Houston, million-dollar homes shrank by 219 square feet or 5 percent since mid-2019, according to Zillow. Markets with the biggest declines were Phoenix, down 1,116 square feet from 2019 to a total size of 2,933 square feet at mid year, and Nashville, where homes lost 1,019 square feet to a total of 3,181 square feet at mid-year.
The good news for Texans is the million-dollar homes, while smaller than those sold three years ago, are still on the large side compared to the rest of the county.
On HoustonChronicle.com: Houston homes sales fall for the fifth straight month, 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 a cost of $381 per square foot.
Sizes and prices are similar in Dallas-Fort Worth and San Antonio. In Austin, where home values have climbed 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 shift in what $1 million buys in suburban communities such as Cypress. A couple of years ago, that kind 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 upgrades galore.”
“It’s not unusual to have a 4,000-square-foot house pushing $1 million now,” Newton said. “The price per square foot has jumped over $200 easily, especially in a lot of nicer new construction neighborhoods.”
The sales volume of $1 million-plus homes in Houston has more than doubled since mid-2019 to 1,215 in the second quarter, with nearly 250 of those sales coming in right at or near the $1 million mark, according to Zillow.
Nationally, homes selling for $1 million or more reached record volumes in the second quarter, rising to 90,110 from 43,421 in the second quarter of 2019, according to Zillow. The sales made up 6.4 percent of all the single-family sales nationally.
Houston followed the trend. Sales of homes for $1 million or more accounted for 3.7 percent the sales in the second quarter, up from just 1.8 percent of the market in the second quarter of 2019.
Austin was second only to Portland, Ore. in the rise in $1 million and up sales, according to Zillow. More than one in 10 Austin buyers paid upward of $1 million in the second quarter as the volume of million-dollar home sales jumped by 220 percent since mid-2019.
Not surprisingly, California cities cornered the market on the priciest petite places. In San Jose, where $1 million-plus homes swelled to 72 percent of the sales, buyers could get a 1,399 square foot house for $1 million. That equates to $715 per square foot.
San Francisco, where 62 percent of homes passed the $1 million mark, homes costing $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 contained 1,835 square feet.
Buyers stretched their money the furthest in Hartford, Conn., where $1 million bought 4,873 square feet.