There are now 550 US cities where the typical home value is $1 million or more

Home prices are reaching a peak. Currently, 550 cities in the U.S. have home values that average $1 million or more, a Zillow report found.

Last year, 491 cities boasted average home values over $1 million. The rise in cities with high-priced homes is due to the tight housing market driving prices up.

California has the largest number of metro areas with million-dollar homes. With 210 million-dollar cities, California has more than the next five states combined. Next in line is New York, quickly followed by New Jersey, which added the most high-priced cities of any state, at 14. The only states that lost million-dollar cities were Florida, Texas and Delaware.

The cities in the table below are home to the largest number of high-priced homes in the country, with many based in California:

Million-dollar cities generally follow the trend of the rest of the housing market. Like the housing market as a whole, million-dollar home values are rising faster than they have in a while.

"Affordability is still a big challenge for buyers, but that hasn't stopped prices from growing," said Anushna Prakash, Zillow economic research data scientist.

The average home is worth 4.2% more than last year while the average million-dollar home is worth 4.6% more than a year ago.

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Luxury homes prices are higher than they’ve ever been

Although luxury home prices rose in the first quarter by 9%, this hasn’t stopped buyers from seeking them out, Redfin reported.

Luxury home sales rose 2% even as non-luxury home sales declined by 4%. High mortgage rates don’t have the same effect on luxury buyers, since many high-priced homes are bought with cash. Nearly 50% of million-dollar homes were bought with cash at the beginning of this year, Redfin found.

Sellers of luxury homes don’t have the same hesitations as other owners dealing with the rate-lock effect caused by high mortgage rates. This contributed to the 13% rise in the luxury home supply, the largest increase on record, according to Redfin.

Although the luxury home supply has increased, it’s still lower than pre-pandemic levels, which is why prices remain high. On average, luxury homes sold for $1,225,000 in the first quarter.

"People with the means to buy high-end homes are jumping in now because they feel confident prices will continue to rise," David Palmer, a Redfin Premier agent in Seattle, explained. "They’re ready to buy with more optimism and less apprehension. It’s a similar sentiment on the selling side: Prices continue to increase for high-end homes, so homeowners feel it’s a good time to cash in on their equity. Even though mortgage rates remain elevated and demand isn’t as high as it was during the pandemic, many homebuyers and sellers feel the worst of the housing downturn is behind us."

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New construction is down

New construction homes have been having a moment over the last few years as homeowners held on to their existing homes due to high interest rates. But construction of new homes fell by 14.7% in March, Realtor.com reported.

Housings starts in March were 4.3% below last year’s level. This is the first month new-builds have been down since October. And both single-family and multi-family new construction dropped. Single-family starts fell 12.4% on a monthly basis, likely due to persistently rising interest rates scaring away buyers.

Although new-builds are down month-over-month, they’re still up 17.4% year-over-year, signaling that there’s still a strong desire for new construction.

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