By Sara Clemence, Forbes.com
Time was (and not so long ago), that seven figures could buy you something really special. A penthouse with amazing views. A stunning Hamptons home. A really, really great place in California. On the beach.
But in nearly every corner of the U.S., the days of million-dollar mansions are, sadly, over. Welcome to an era of million-dollar bungalows, garden apartments and two-bedroom condos (in need of renovation).
However, most Americans still consider $1 million a lot of money, no matter what their real estate agents tell them--and rightly so. The problem is that in certain markets, there seems to be a complete disconnect between property value and the buying power of a dollar. In Manhattan, for example, one million bucks buys a two-bedroom condo--and usually not in a great part of town or with oodles of compensating charm. In the Hamptons, it will buy a modest A-frame unfashionably deep in the woods.
Fortunately, not everyone has to pay such crazy prices or live in such overpriced places. There are still many desirable markets around the U.S. where a million still goes a long way. In Las Vegas, for example, thanks to a booming housing market and low interest rates, the market continues to offer good value for the money, in spite of rising prices, as do Raleigh, N.C. and Albuquerque, N.M.
What happened to the power of a million? From 1999 to 2004, U.S. home prices increased by a whopping 48%, according to the U.S. Office of Federal Housing Enterprise Oversight. In states such as California (up nearly 100%), New York (an increase of about 68%) and even Maine (63%), costs have risen even more dramatically.
"In California, a million-dollar home is no longer a big deal," says John Burns of John Burns Real Estate Consulting in Irvine, Calif. "In places like Palo Alto, that'll buy you a simple 2,000-square-foot home that's 40 years old. It's pretty crazy."
In Aspen, Colo., according to Gary Feldman, a broker for Coates Reid Waldron, a million will get you a two-bedroom condo, if you're lucky. "Aspen has limited real estate that's available, and our political climate since the mid-1970s has been severe anti-growth," he says. "It's turned Aspen real estate into a limited commodity chased by the world's wealthiest people."
New York is more expensive than ever--the average Manhattan sales price passed the $1.2 million mark in the first quarter of 2005. Most new buyers are probably scratching their heads wondering what they spent their money on. "A million dollars, these days that's a two-bedroom," says Richard Hamilton, a real estate agent at Halstead. "There are one-bedrooms going for that much. And the days of studios under $400,000 are rapidly disappearing."
You can find apartments in emerging areas, such as Harlem or Clinton in Manhattan, or in Brooklyn and Queens, though prices have shot up there, too. "Forget SoHo," says Hamilton. "Forget the Upper East Side." And forget Tribeca, which recently earned the distinction of having the highest median home sale price in all of New York City, according to the Most Expensive ZIP Codes 2005.
Surrounding suburbs and vacation areas haven't been immune to the rapid price increases. The assistant to a man from London telephoned Corcoran broker Diane Saatchi in the Hamptons, to say that the man was looking to spend $3 million on a house. "What month do you want?" joked Saatchi, who is currently listing a summer rental that comes close to $1 million.
In the Hamptons, a million can get a pre-owned house with a pool, but it will not be within walking distance of the water or villages, she says. You could opt for a better property, but you'll have to tear down the house that sits on it.
There are places where a million dollars buys a very nice piece of property. Don't expect to be living in Kansas City's equivalent of Mar-a-Lago. But you can have several bedrooms, marble baths and some lovely high-end finishes.
"You can get a beautiful property in this area for $1 million," says Georgia Murray, a broker for Smythe, Cramer near Cleveland. For a million dollars in posh Shaker Heights, where properties can sell for as much as $2.5 million, buyers here expect a house that has been maintained and updated, in the 5,000-square-foot range.
These days, a lot of it comes down to lowering your expectations of what a million can buy. "I think a lot of people are settling," says Neil Garfinkel, a real estate lawyer with Abrams Garfinkel Margolis Bergson in New York and California. "Whereas eight to ten years ago, they didn't have to settle."
You still don't have to--if you know where to look. To find out where you can get the most and least bang for your million bucks, click on the links below.