‘Years ago… you would’ve been considered pretty rich’: $1 million homes are now the ‘entry point’ for some US housing markets — is it time to consider alternative housing options?

The $1 million housing riddle

So why are otherwise utilitarian homes so expensive? Many factors come into play, from too-tight inventory to an influx of would-be first-time homeowners flocking to already popular places, high mortgage rates be damned. As of late August, rates for a 30-year fixed mortgage averaged 6.35%, according to the Federal Reserve Bank of St. Louis. That’s down year over year, but on par with rates from August 2001 — nearly a quarter century ago.

Sure, you could buy in Fargo, North Dakota's most expensive neighborhood (Bluemont Lakes), where values average under $400,000, according to Zillow. But is that nearly as rewarding as Chicago's Lincoln Park neighborhood, perched on Lake Michigan, known for its great schools and proximity to countless foodie magnets?

A single-family home there fetches a median of $1.8 million, but cheer up: At least that's down 14.5% from this time last year, Redfin says.

Indeed, the Journal’s Redfin numbers show some alarming trendlines. Exactly ten years ago, just 2.1% of American homes were valued at $1 million. Fast forward to today and that number has jumped fourfold. It’s unclear whether these numbers factor for inflation, which totaled 32% over that period. Still, that hardly accounts for the $1 million march in its totality.

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Options worth moving into

If housing prices have you in a domestic funk, there’s hope. One option is to put multiple generations under one roof to bear the financial burden; separate, unrelated families can also buy a converted apartment building and occupy once-separate units.

The U.S. Department of Housing and Urban Development (HUD) reports that the number of shared housing units increased between 2000 and 2019 — though the final stats remain frustratingly vague.

The shared housing rate as of 2021 ranged between 3% and 20% of all housing units, "depending on the expansiveness of the definition." Suffice it to say that three families splitting a $1 million three-flat could each carry less than $350,000 of the mortgage, depending on the split.

Another choice — and a cute, fun one at that — is to purchase and assemble a “tiny house,” known in some urban areas as an additional dwelling unit (ADU). You can even buy them online for under $10,000 (imagine the delivery truck pulling up). While these models may resemble more of a U-Haul trailer than a bona fide domicile, nicer tiny homes come tricked out with decks, multiple levels and kitchenettes and can hover around $100K.

That said, tiny houses present obstacles that range from building permits to available land, and some cities have strict regulations in place. The Additional Dwelling Units Ordinance in Chicago, for example, allows ADUs on properties where homes already exist, but it’s a patchwork that remains clear as mud in terms of future expansion.

Perhaps the most simple option? Shop around. While the Journal presents an extreme case, there are still three-bedroom homes in Anaheim selling for less than $400,000, including one not-so-shabby abode priced to move at $139,999.

So do you need $1 million to get in the game? Not really: especially if you boast a wealth of common sense.