U.S. Cities with Million-Dollar Homes Quadruple, Squeezing Out Middle Class

The number of U.S. cities with median home values exceeding $1 million has quadrupled since 2014, making homeownership increasingly unaffordable for middle-class Americans. Biden's $258 billion housing proposal aims to address this crisis, but some young adults remain skeptical.

author-image
Salman Akhtar
Updated On
New Update
U.S. Cities with Million-Dollar Homes Quadruple, Squeezing Out Middle Class

U.S. Cities with Million-Dollar Homes Quadruple, Squeezing Out Middle Class

The number of U.S. cities with median home values exceeding $1 million has quadrupled since 2014, rising from 119 to 550, making traditionally middle-class communities like San Gabriel, California, with a population of about 40,000, unaffordable for many Americans. This trend is largely driven by the "mortgage lock-in effect," where homeowners are unwilling to sell their homes and move, even as prices continue to rise.

California now has 210 "million, essential-dollar cities," up 15 from the last count in 2023. This includes not only well-known wealthy areas like Beverly Hills and Malibu but also formerly working-class towns like Bonita, Tustin, and San Gabriel. The housing affordability crisis has transformed the state, with median home prices increasing 33.5% over the last five years and now being at least 10 times more than median household earnings.

Rising mortgage rates have made home purchases more expensive and discouraged homeowners from selling their properties and taking on higher mortgage rates. As a result, the housing market has encountered a "big speed bump," with home sales falling in March 2023 as buyers pulled back due to the higher borrowing costs. The median price for an existing home in March rose 4.8% to $393,500, the highest price recorded for the month, though still down from a peak in June 2022.

Why this matters: The growing housing affordability crisis is making homeownership increasingly out of reach for middle-class Americans, particularly in states like California. This trend has far-reaching implications for economic mobility, wealth inequality, and the ability of families to build long-term financial stability through homeownership.

President Biden has unveiled a $258 billion housing proposal to address the affordable housing crisis, including reforms to tax credits for homebuyers and sellers, as well as initiatives to boost housing development. The plan aims to incorporate a one-year tax credit of up to $10,000 for middle-class families that sell their starter homes and a mortgage relief credit for first-time middle-class homebuyers of up to $5,000 for two years. However, some young adults express concerns that the plan may not be enough to address the current challenges in the housing market, which they describe as "not realistic for Gen-Z to purchase homes promptly" and in an "eat or be eaten" stage due to skyrocketing prices and inflation.

Key Takeaways

  • U.S. cities with $1M+ median home values quadrupled since 2014, now at 550.
  • California has 210 "million-dollar cities," up 15 from 2023, including former working-class towns.
  • Housing affordability crisis driven by "mortgage lock-in effect" and 33.5% price increase in 5 years.
  • Biden's $258B housing plan aims to aid middle-class homebuyers and sellers, but may not be enough.
  • Homeownership increasingly out of reach for middle-class Americans, impacting economic mobility and wealth.