Wednesday, September 28, 2005

$1 million homes no longer that rare

Census shows there are more than 1 million homes in U.S. with the hefty price tag. NYC apartments cost that much.

By David B. Caruso / Associated Press

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NEW YORK -- Everything about Frank Fazio's new two-bedroom apartment on Manhattan's Upper West Side is decidedly average, including its price: a hair under $1 million.

For the first time, there are more than 1 million owner-occupied homes in the United States worth $1 million or more, according to a Census Bureau survey published late last month.

Once a symbol of unusual wealth, million-dollar dwellings seem like a dime a dozen in some places. San Francisco has more than 20,000 of them. There are another 46,000, or so, in Orange County, Calif.

In Manhattan, even someone with a million dollars in their pocket can't buy luxury. The average price for an apartment in all but Harlem and the borough's northern tip climbed above $1.2 million in the second quarter of 2005, said Gregory Heym, chief economist for Terra Holdings, an owner of real estate brokerages in the city.

"For a million dollars, you couldn't get a two-bedroom on the East Side," Heym said.

The surge in high-end prices has happened quickly. The Census Bureau's 2004 American Community Survey found 1,034,386 homes worth at least $1 million in 2004, compared to 595,441 in 2002 and only 394,878 in 2000.

Demand for housing is outstripping supply in many U.S. markets, said John M. Clapp, a professor of finance and real estate at the University of Connecticut. Low interest rates have made it easier for people to afford more house, as have some new financing methods, like interest-only adjustable mortgages, which initially allow buyers to lower their monthly payments.

If prices stop rising, other potential losers could be speculative investors who were counting on a quick resale of a home at a profit to pay back debt. Economists have split over whether the rise in housing prices constitutes a bubble that could burst at any time.

"In the long run, things have to come back into equilibrium," Clapp said.