The million-dollar-home dream goes poof!

If you paid seven figures, it probably isn’t worth that anymore; for buyers, $500,000 is the new $1 million.

By Prashant Gopal, BusinessWeek.com

Half a million dollars is, by almost any standard, a lot of money. But during the past few years, when credit was easy and regulations were loose, for many Americans it didn't seem like all that much.

That's because they were able to borrow huge amounts of money to buy new homes, often with little or nothing down. And while most homes sold in the United States, even at the height of the housing bubble, were $500,000 or less, rising prices in many major cities and affluent suburbs around the country pushed the cost of a three-bedroom home into seven figures or more.

But the gap between $500,000 and $1 million is more than monetary. It is also psychological. And during the recent boom years, Americans became reckless consumers, buying cars, houses, clothes and much more that they couldn't really afford. The dream of a $1 million home, once so distant, became tantalizingly reachable.

Now that has all changed. While certain pockets, such as Manhattan, San Francisco and Boston, remain high, real-estate prices around the country have fallen dramatically. The downside to this, of course, is that many people now owe more money on their home than their home is worth. The upside is that valuations are much more realistic — and affordable.

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