A $1 million home no longer guarantees luxury across much of the United States, as years of persistent price appreciation — fueled by a chronic housing shortage and the legacy of historically low mortgage rates during the pandemic — have pushed millions of properties into seven-figure territory.

The number of owner-occupied U.S. homes valued at $1 million or more rose from approximately 1.5 million in 2005 to 6.9 million in 2024, according to an analysis by the National Association of Realtors (NAR). These properties now represent 8% of the housing market, up from just 2% two decades earlier.

The shift is most pronounced in high-cost regions. Approximately 40% of owner-occupied homes in Hawaii are valued at $1 million or above, while roughly one-third of homes in California and Washington, D.C., have reached that threshold. By contrast, million-dollar homes account for only about 1% of properties in Mississippi, North Dakota, and West Virginia.

Billy Rose, founder and vice chairman of real estate brokerage The Agency, told FOX Business that the $1 million mark ceased to represent true luxury in Los Angeles years ago.

"In L.A., it seems like there's so much wealth here and there's so much elevated housing that the million-dollar threshold now is truly entry," Rose said. He noted that some first-time buyers in the region begin their searches at around $2.5 million or $3 million.

Buyers are also contending with stubborn prices and limited inventory across many markets. Rose said sellers remain anchored to the values reached when borrowing costs were lower, while buyers hold out for better deals.

"That has put kind of a staring contest between buyers and sellers," he said.

The $1 million threshold also appears to influence buyer behavior in measurable ways. Since 2015, approximately 2.4 times more homes have sold just below $1 million than just above it, according to NAR data. Buyers may set their search filters below the round number, face different mortgage requirements above it, or encounter taxes that trigger at the $1 million mark.

In many high-cost areas, the federal conforming loan limit — set annually by the Federal Housing Finance Agency and adjusted higher in recent years — still falls below typical home prices, meaning buyers of million-dollar properties often must secure jumbo loans, which carry stricter underwriting and larger down payment requirements than conforming mortgages.

New York's mansion tax serves as one example of a threshold-related cost. The tax has applied to residential purchases of $1 million or more since 1989, even though that amount would equal approximately $2.7 million today after adjusting for inflation, the NAR report noted. The 1% levy adds $10,000 to the cost of purchasing a $1 million home.

"I think you need to be looking at whether those thresholds need to increase and be more keeping with the times," Rose said.

The redefinition of luxury extends beyond U.S. borders, according to a recent report from The Agency. In markets near Toronto, 1 million Canadian dollars — approximately $731,000 — no longer purchases a true luxury property, said Steve Bailey of The Agency. He noted that luxury homes in those markets generally start closer to 1.7 million to 3 million Canadian dollars, or roughly $1.2 million to $2.2 million.

The U.S. housing market is simultaneously moving in two directions. A recent Zillow report found that luxury demand is surging while starter-home sales are softening as inventory in that segment grows.

Rose described the trend as reflective of a broader "K-shaped economy," in which wealthy buyers enjoy greater financial flexibility while lower-income buyers face mounting pressure.

"It's creating a larger divide between, you know, the haves and the have-nots," he said.

FOX Business' Eric Revell contributed to this report.