Gosh, 1% on $1m, that's almost $10k! I can see that how would discourage homeownership and distort the market.

Actually wait, I can't.

You're comparing the wrong numbers. The question is what 1% of the purchase price does to the amount you need for your down payment and fees. On a 10% down payment an extra 1% increases the amount you need by 10%. Remember that while a million dollar home sounds extravagant, it's first time buyers who often have just barely enough who are trying to buy these.