U.S. home prices have begun to rebound in the past year. And in the most expensive markets, where the average home sells for well over $1 million, recoveries are among the strongest, increasing between 20% and 50% in most cases.
According to Coldwell Banker Real Estate, there are at least 10 U.S. cities where the average listing price for a home in the first six months of this year exceeded $1.2 million.
The majority of these cities are on or near the California coast. For example, in San Jose suburb Los Altos, homes sold in the first half of the year averaged a $1.7 million price tag. Based on data provided by Coldwell Banker, 24/7 Wall St. reviewed the most expensive cities for buying a home.
In an interview with 24/7 Wall St., Coldwell Banker Chief Operating Officer and President Budge Huskey explained that for the first time in years, residents of the country’s most expensive housing markets are largely professionals working in or very near their home. In prior years, he explained, many of the most expensive communities were simply very desirable for wealthy families or individuals, without necessarily being employment centers. Many of these people were retired or worked from home.
“Now,” Huskey said, “the emphasis is on those markets that are in proximity to true, strong business centers, where employment has been consistent, and the overall level of wealth and wages has been high relative to other opportunities within the country.”
These expensive markets are concentrated around the tech industry, which has remained strong throughout the recession. As a result, most of these cities and suburbs are near the heart of California’s Silicon Valley. These are areas driven by the tech boom, explained Huskey. “In an area like Los Altos, for example, you’re looking at a location that is 15 minutes away from the headquarters of such corporate giants as Google and Facebook.”
Income in the expensive housing markets is among the highest in the country. According to U.S. Census Bureau data, median household income in these cities far exceeds the U.S. median income by at least $20,000. In Saratoga, California, one of the cities on our list, median income is nearly triple the U.S. figure of $51,914.
Two cities outside California are on the top 10 list, one of which isn't even the continental U.S.; visit 24/7 Wall St. to see them.
Based on data published by Coldwell Banker in its annual Home Listing Report, 24/7 Wall St. identified the country’s most expensive cities for buying a home. Homes in these cities had the highest average listing price between January and June of this year. Markets with less than ten four-bedroom, two-bath homes were excluded from the survey. We also examined data on vacancy rates, median price per square foot, and changes in price from real estate listing service Trulia. Information on income, educational attainment, and poverty rate, among other data, is from the U.S. Census Bureau.
5. Palo Alto, Calif.
> Avg. listing price: $1,495,364
> Median household income: $120,670
> Pct. households $200,000+ income: 39.3%
In Palo Alto, 48.7% of adults have a graduate or professional degree — well more than four times the national rate of 10.3%. The city’s proximity to Stanford University, one of the top universities in the nation, may be partly the reason behind the city’s highly educated population. Among the companies headquartered in the city are Hewlett-Packard and Tesla Motors. The city is a large employer of highly skilled employees, as 25.3% of its workers are employed in professional, scientific and management occupations, well above the 10.4% of workers nationwide. Perhaps the most famous resident of Palo Alto is Facebook founder Mark Zuckerberg, who bought a $7 million home there last year.
4. Menlo Park, Calif.
> Avg. listing price: $1,506,909
> Median household income: $107,860
> Pct. households $200,000+ income: 34.9%
Menlo Park is one of just four cities where the average listing price for a four-bedroom home exceeds $1.5 million. As of 2010, the median income in the city was slightly below $108,000. However, the recent Facebook IPO has been a windfall to the area. In June, real estate listing service Zillow reported that the “proportion of million-dollar listings” in Menlo Park — where Facebook is headquartered — rose by 87% between the company’s IPO filing and its first day as a public company. Among the houses available in Menlo Park are a five-bedroom home with a gym, theater area and wine cellar, which is listed for $4.6 million, and a six-bedroom 5,200 square feet home that’s listed for slightly under $5 million.
3. Saratoga, Calif.
> Avg. listing price: $1,582,434
> Median household income: $145,023
> Pct. households $200,000+ income: 43.1%
Though home prices in the nearby San Jose metro area fell by 25.1% peak-to-trough, Saratoga is yet another example of how the Silicon Valley housing market has recovered. Currently, the median price per square foot for homes in San Jose is $337, according to Trulia, more than all housing markets except San Francisco and Honolulu. Prices for many homes in the area have skyrocketed, according to listings on Zillow. A home currently listed for nearly $10 million last sold for just over $2.1 million in 2000, while a home listed for $14.9 million last sold in 1994 for just over $1 million. As of 2010, 43.1% of Saratoga households earned more than $200,000 per year, while 40.9% of adult residents had a graduate degree, versus 10.3% nationwide.
2. Newport Beach, Calif.
> Avg. listing price: $1,658,000
> Median household income: $107,007
> Pct. households $200,000+ income: 37.6%
Outside of Northern California, Newport Beach is the most expensive city to buy a home. Home prices are so high in the city that in 2009 legendary bond investor Bill Gross bought a nine-bedroom, 11,000 square feet home for $23 million — and then tore it down. In 2011, Gross listed the empty plot of land for $26.5 million. Orange County as a whole has a vacancy rate of just 1.5%, among the ten lowest in the nation. Despite a 32.7% drop in home prices from peak to trough during the recession, Orange County’s median price per square foot is $265. This trails only the Honolulu, New York, San Francisco and San Jose metro areas.
1. Los Altos, Calif.
> Avg. listing price: $1,706,688
> Median household income: $149,964
> Pct. households $200,000+ income: 43.6%
In Los Altos, the average four-bedroom, two-bathroom home lists for nearly $50,000 more than any other city in the nation. According to Coldwell Banker, for that price a buyer could purchase 28 similar homes in Redford, Mich., the nation’s cheapest housing market. In Redford, the average home lists for just $60,490. Currently, asking prices in the San Jose metro area have risen 12.7% year-over-year, according to Trulia. This is more than nearly every other metro area in the country.