How $1 million Bay Area homes compare to other real estate markets

But in the Bay Area, $1 million homes are considered on the cheap side. According to Zillow, a typical single-family home in San Jose — the most expensive market in the country — was valued at over $1.5 million in July, and homes costing $1 million or more are the norm in the San Jose area, constituting 72% of the market.

In San Francisco, the second-most-expensive market, the typical home value was $1.46 million and $1 million-plus homes accounted for 62% of the market.

So, it stands to reason that buyers with $1 million to spend in the Bay Area are getting the least square footage, said Matt Kreamer, a data spokesman for Zillow.

“Just like toilet paper rolls and candy bars, houses have experienced ‘shrinkflation,’” he wrote in an email. “As the price of homes has skyrocketed over the past couple years, you just don’t get as much for your money as you used to.”

Among the 42 largest U.S. markets examined, the San Jose metropolitan area, which consists of Santa Clara and San Benito counties, had the lowest median square footage of 1,399 for a $1 million home for the quarter ending in April 2022, according to Zillow. The San Francisco metro, which also includes Alameda, Contra Costa, Marin and San Mateo counties, followed at No. 41, with a median square footage of 1,636.

That compares to New York, at No. 37 with 2,500 square feet, Sacramento at No. 34 with 2,541 square feet, and Chicago in the middle at No. 21 with 3,375 square feet.

In Dallas, at No. 10, $1 million will buy 3,818 square feet, and in No. 1 Hartford, Conn., it will buy a very roomy 4,873 square feet.

“The higher homes cost in general, the less you can get for your money,” Kreamer said. “Also, land is at a premium in the Bay Area, because of geography and population, so homes generally have smaller footprints than they do in areas where there is more room to build.”

In 2016, the typical home in the Bay Area cost $915,000, and $1 million would get a buyer nearly 2,000 square feet, Kreamer said.

“Now, the typical home costs nearly $1.5 million, and so the size of a house you can get for $1 million has shrunk to just over 1,600 square feet,” he said.

From the quarter ending in April 2020 to the same period ending in April 2022, the median square footage for a $1 million home decreased 84 square feet in San Francisco and 150 square feet in San Jose. The median square footage has dropped 20%, or 343 square feet, in the San Jose metro, and 17%, or 324 square feet, in the San Francisco metro since January 2016, when Zillow first started tracking the data.

“In much of the country, people picturing a $1 million home are thinking luxury,” Kreamer said. “It’s a big number, to be sure. But in the Bay Area, the typical home is already much more than that, so many home shoppers would be thrilled to find a home that meets their needs for just $1 million.”

With million-dollar-plus homes already constituting the majority of the Bay Area market, Kreamer noted that the decrease in square footage for $1 million homes there since 2020 was relatively small compared with other metro areas such as Seattle, with a decline of 421 square feet since April 2020, Los Angeles, with a drop of 544 square feet, and Indianapolis and Jacksonville, each with a whopping 1,000-square-foot drop.

The U.S. median square footage for a $1 million home declined 397 square feet, or 13%, since April 2020.

“The prices in the Bay Area might make an analysis like this a little less relevant, but it sure brings into context just how expensive it is there compared with most of the country,” Kreamer added.

A comparison of what $1 million homes look like helps illustrate the Bay Area’s reality as well: San Jose sets the floor for the U.S., at three bedrooms, two bathrooms and just under 1,400 square feet. At the other end of the spectrum is Hartford, where $1 million buys more than three times as much: four bedrooms and four bathrooms in 4,873 square feet.

The price per square foot for a $1 million home in the Bay Area has steadily increased over the years. In the San Jose metro, it’s gone up 25%, or $141, since January 2016, and 11%, or $69, since April 2020. In the San Francisco metro, the price per square foot increased 20%, or $101, since January 2016, and 5% or $30 since April 2020.

The housing crisis is an issue across the country, but it’s especially acute in the Bay Area, Kreamer said, with its severe supply shortage compounded by strict rules on building.

“The fewer homes there are, the more they cost as a growing number of people compete for them,” he said. “We’re in an affordability crisis that we need to build our way out of, and a good first step is eliminating roadblocks to construction.”

Kreamer said it’s fair to say that the situation is becoming “increasingly unsustainable.”

“At some point – and it seems like that’s happening now as interest rates have risen this year — we’ll hit an affordability ceiling, where people just won’t be able to afford to buy homes and the market will have to rebalance,” he said.

As interest rates have increased in recent months, inventory has been increasing, price growth is slowing and homes are staying on the market longer, which could bring things “closer to normal,” Kreamer said.

Kellie Hwang is a San Francisco Chronicle staff writer. Email: Twitter: @KellieHwang

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