A survey conducted by the National Association of Home Builders shows that Connecticut has the fourth-highest number of million-dollar homes in the nation. This residence at 1 Falcon Road in Guilford is currently on the market for $2.5 million.

Connecticut residents like their luxury homes, according to a recent survey that revealed the state has the fourth-highest number of million-dollar residences in the nation.

No other state came close to California in the latest survey conducted by the National Association of Home Builders, which analyzed numbers from the U.S. Census taken three years ago. The Golden State had 128,600 million-dollar homes, or 41 percent of the nation’s total. New York had the second-highest number of such residences, with 23,000, or 7.1 percent. Third on the list was Florida, with just over 18,000 luxury homes (5.8 percent), followed by Connecticut with 13,900 (4.4 percent). Coming in fifth was Illinois, with 3.9 percent or about 12,400 homes in the million-dollar range.

“It’s no surprise that California has cornered the market on million-dollar homes,” said Jerry Howard, chief executive officer and executive vice president of the National Association of Home Builders. “However, the sheer concentration of million-dollar residences in just a few states may be greater than most people had realized.

“Combined, these top five states accounted for about 26.5 percent of the nation’s total housing stock, yet more than 62 percent of its million-dollar homes. Add in the next five states – New Jersey at No. 6, followed by Texas, Massachusetts, Washington and Michigan – and you’ve accounted for more than 75 percent of the market.”

Connecticut, long known as a bedroom community for New York City as well for its shoreline, continues to have a thriving luxury home market.

“Well, as you would suspect, much of that million-dollar home market is in Lower Fairfield County, along the ‘Gold Coast,’ as they call it. A number of those homes are also located in the Farmington Valley, although it’s not as densely populated,” said Bill Ethier, executive vice president of the Home Builders Association of Connecticut.

Taxing Situation

Barbara Pearce, president of North Haven-based H. Pearce Co., explained that while there are plenty of million-dollar homes in the state, those along the shoreline don’t seem to be trading. Basically, property taxes have risen significantly along the shoreline in the last two years, becoming a hindrance to potential homebuyers.

“High-end properties are not moving at the rate that lower-priced properties are,” said Pearce. “I think this has less to do with pricing and more to do with tax revaluations. Most houses in our market priced well over a million dollars aren’t moving.”

Pearce also noted that houses in the interior of the state don’t seem to be facing similar problems, citing the fact that New Haven just chalked up its first million-dollar sale last month.

“You’re finding sellers who have seen tremendous run-up in the market. People knew taxes were going up so they put their homes on the market, but they also don’t want to take less than their home is worth,” she said. “I personally don’t think prices are too high. The Connecticut coastline is as beautiful as any place in the world and there’s no reason that prices shouldn’t be as high as they are in the Hamptons [on Long Island, N.Y.] or other places. And the fact that they didn’t go up for a very long time means that you can’t look and say that it’s out of control.”

She added, “I think direct waterfront was undervalued for a very long time.”

Pearce said that luxury homes often can be linked, at least psychologically, to the stock market. When the market was doing poorly in recent years there was an increase of cash buying at the high end as investors looked to diversify. That number has dropped off as the stock market performance has veered toward the positive, she said.

“I would expect that the long-run prognosis for high-end homes on the shoreline is excellent, but in the very short run people have to absorb increases in property taxes,” she said.

So while million-dollar homes may become commonplace in Connecticut, there are several states where such homes still stand out. North Dakota had just 51 such homes as of the latest U.S. Census, and while South Dakota had more than twice that number – at 129 – it too was outnumbered by every other state. Vermont’s 179, Arkansas’s 195 and Montana’s 324 homes in the million-dollar range rounded out the bottom five. Together, those states accounted for less than half a percent of all U.S. million-dollar homes.

Not all million-dollar homes are created equal, said Howard. “Growth controls and regulatory barriers have been on a collision path with an unrelenting demand for housing in high-cost markets like California. Consequently, the underlying costs of building new homes have soared, which also pushes existing-home values up across the board. So a million-dollar home in California may be comparably equipped to a high six-figure home in some other market – the difference being entirely in land and regulatory costs.”

“Like just about all real estate, location is very important, and with million-dollar homes you’re going to be talking about income of the folks in the area, alongside land costs. Land costs are easily the No. 1 cost factor in the ultimate price of a home,” he said. “Materials don’t vary that much. A two-by-four costs the same here as it does in the Midwest.”

The interior fit-out of a home also leads to the exorbitant price, and Ethier noted that often homebuyers are typically interested in very-high-quality furnishings that can quickly elevate the cost of building or purchasing a home.

“The market for these homes is still there,” said Ethier. “It may have slowed down a little bit a few years back, but these homes are definitely still being built.”

He explained that there are several builders in Connecticut that specialize in the construction of luxury homes. While those homes often require special construction because of non-traditional architecture or coastal locations, Ethier noted it is the relationship with the clientele that is most important.

“This is a different type of market than your typical builder deals with,” he said. “These builders have learned to specialize, and have come to appreciate and work well in this market.”

Not only does Connecticut rank No. 4 on the list of million-dollar homes, it is also No. 2 in regards to in-state percentage.

“If you dig a little deeper into the numbers you’ll see that if you compare the total number of houses to the number of million-dollar homes we’re second only to California,” said Ethier. “It turns out we have a very expensive market here in Connecticut.”

According to information from the Hartford Co-op multiple listing service, there were 400 homes listed for sale in Connecticut for $1 million or more between Aug. 1, 2002, and Aug. 5, 2003. Of those, 71 were actually sold, spending an average of 78 days on the market. The average asking price for those homes was $1.79 million while the average sale price was slightly lower at $1.36 million.