A Million Here, A Million There
What's a Seven-Figure House? Not What Many Expect.

By Dina ElBoghdady and Mary Ellen Slayter
Washington Post Staff Writers
Saturday, April 19, 2008

Stephanie and Ed Aron figured they would spend about $850,000 to buy a home. But before they knew it, they were signing a $1.2 million contract for a newly built house in Bethesda.

"When I was growing up, a $1 million house meant you had a pool and a driver," said Ed Aron, 37, who is from rural Colorado. "But we're just a middle-class family."

For many home buyers, reaching the $1 million threshold can be an intensely emotional experience, even though that's not an unusual amount to spend in parts of the Washington area. Here, that kind of money can buy a wide range of homes, from a three-bedroom condominium in Cleveland Park to a waterfront estate in Calvert County.

No matter what you get for it, $1 million continues to sound and feel like a big number because of its "historical value," said behavioral economist Dan Ariely, author of the book "Predictably Irrational."

"Think of what we automatically associate with $1 million: millionaire," said Ariely, a professor at the Massachusetts Institute of Technology. "We don't distinguish between $1 million, $2 million or $5 million. We lump them together."

Categorizing and giving names to numbers helps us think about them, he said, and entering the $1 million arena feels like a big jump.

In many ways, it is. A $1 million price is more than double this area's median, $420,000. These pricier homes tend to be the province of move-up buyers who have built equity in previous homes, such as the Arons, who needed more space for a growing family. And the higher price comes with higher property taxes and, with larger homes, higher utility bills and maintenance costs.

Then there's the financing.

"The current mortgage environment makes financing that million-dollar home costlier relative to a more moderately priced home than was the case a year ago," said Greg McBride, senior financial analyst at Bankrate.com, a personal finance Web site.

But in the Bethesda neighborhood where the Arons live, the million-plus price is common. In their Zip code, 93 of the 148 single-family houses for sale are listed at $1 million or more, said their real estate agent, Joan Caton Cromwell. Three are $4 million or higher.

"We all think: 'If only I had $1 million,' " said Cromwell, who works in Long & Foster's Chevy Chase office. "We have all these grand thoughts about what we could get. But when buyers see what they actually can get for that inside the Beltway, they're often deflated."

Stephanie and Ed Aron were. They originally wanted a house within walking distance of Metro in downtown Bethesda. But in their price range, all they could find were smallish fixer-uppers at best, they said.

They did not give up on Bethesda. They wanted to be in Montgomery County so that someday their son Connor, now 1, could attend its well-regarded schools. Being in Bethesda would also cut down on Ed Aron's commute to Laurel.

So they bought a four-bedroom house a short drive from downtown Bethesda. It's about three times as large as the rowhouse they sold in Old Town Alexandria. Stephanie Aron said they are happy with the decision but "still shocked" at what they paid.

Jon Heimerman, a chief financial officer at a D.C. publishing company, is not shocked at what he paid. Rather, he's shocked at how little he got for it: a townhouse in Old Town Alexandria, and not even a historic one.

Heimerman moved here from Minneapolis, where he and his wife, Karen McKeon, lived in a five-bedroom house on a 3.5-acre lot in an upscale neighborhood.

They sold that house for about $1.2 million. He had no delusions that he would be able to get a replica of his Minneapolis home in this area, he said.

"But I also did not expect that whatever my money could buy in Minneapolis would be 50 percent more expensive here," Heimerman said. "Everybody kept telling us we'd see great deals and lots of opportunities since we were coming in as cash buyers. . . . But there weren't a whole lot of exciting or appealing things to choose from."

With the housing market downturn, many buyers expect more for a million now than they would have in the first half of the decade, when prices were soaring and bidding wars were common, real estate agents said.

Those heightened expectations have led to buyer hesitation as shoppers wait for falling prices to fall more.

"A luxury buyer does not have to buy a house tomorrow because they usually have a roof over their heads already," said Casey Margenau, an agent with Re/Max Distinctive in McLean. "So if they want to postpone a purchase for a year or two, it's not a big deal to them."

That has meant waning demand and then price cuts by sellers such as Jill Chodorov. She recently cut the asking price on her three-bedroom Cleveland Park condo from $1.3 million to $1.1 million.

Chodorov started what she described as a quality renovation of the condo immediately after she bought it in 2005. She said she spent $30,000 on the crown molding alone and rewired the place to include high-speed Internet. The condo, on the fourth floor of a 1920s art deco building, is one of the few units in the building with a private, heated garage.

"I felt it was priced right at $1.3 million, but the market decided otherwise," Chodorov said. "I feel it's a great value now."

William O'Neill's home in Calvert County has been on the market for more than a year. But he hasn't budged on the $999,999 price because he thinks it's right.

His agent, Michele Rockhill of Long & Foster, advised him to keep the home under $1 million. Buyers tend to group prices in $50,000 increments when organizing their searches. By asking more, she told him, O'Neill would miss potential buyers.

"Besides, doesn't $999,999 sound cheaper than $1 million?" Rockhill asked. "One dollar makes all the difference in the world in the buyer's mind."

O'Neill has lived in the house since his parents moved into it 61 years ago. He inherited the property with his sister when his parents died. O'Neill now wants to downsize.

The 1936 Colonial overlooking the Chesapeake Bay has its own bayfront pier.

Unlike many of the newer and pricier homes in the county, it's not in pristine condition. The kitchen needs major updating. The house lacks air conditioning. There are cracks in some of the walls.

But the house has "good bones," Rockhill said. The walls are plaster. The floors are oak. The roof is slate.

O'Neill figures his home would fetch a higher price if he invested time and money into upgrading it. But he'd rather not.

"I fear I would do all that, and then somebody would just come along and tear it down," O'Neill said. "Frankly, I'd cry if I saw all the money I invested ripped up in a dumpster."