America's Most Expensive ZIP Codes 2014: Behind The Numbers

Forbes’ annual list of America’s Most Expensive Zip Codes is based on data from Altos Research, a Mountain View, Calif.-based real estate analysis firm. For this ranking, Altos calculated the median home prices for more than 28,500 U.S. ZIP codes (covering 95% of the U.S. population) using asking prices for single-family homes and condominiums listed for sale. To account for any blips that might occur when an unusually high-priced property comes on the market, Altos used a rolling average for the 90-day period ending September 19. For each ZIP code, Altos weighted prices according to the mix of property types in that market. As a result, ski towns with a high preponderance of condominiums see their median price pushed down, even if single-family homes in these areas are priced very high. Also, co-ops were not included, which may have artificially depressed the median prices for ZIP codes within some of Manhattan’s toniest Central Park neighborhoods.

We’ve used this methodology for many years, and it of course is not the only way to go. Closed sales, for example, are a more traditional metric for calculating an area’s median price. But we decided to use asking prices again this year for a couple of reasons. “Closed sales are by definition old data and a small sample size. The active market is what you experience when you walk in to a market right now and look around,” points out Mike Simonsen, president of Altos Research. “Where there might be a couple sales recently in Atherton, there are 24 on the market right now. In our analytic view, right now is a far better representation of ‘the market.’ ”

We think that’s a fair way to look at the market. “Asking price and sales price are highly correlated,” Simonsen argues. “Any given property may be over- or under-priced, but in aggregate they are essentially the same number. With the real-time measure, you just know four months ahead of time. “ Supporting this approach, a recent study by New York appraisal firm Miller Samuel found that in Manhattan, 49.2% of listings sold for at or above the asking price during Q3 2014.

But we consider methodology carefully here at Forbes, and so we also considered instead using Zillow ’s research, which offers an estimated value for every single home in a particular ZIP code, whether it’s for sale now, has recently traded hands, or hasn’t been on the market in years. That data wasn’t available for every ZIP, and in particular left out a number of New York City ZIPs known to be pricey. Another option we considered was comparing ZIPs on a per-square-foot basis, since that would be a true apples-to-apples price comparison. But people tend to shop for homes, not square feet. So we decided to stick with our previous methodology.

Other notes: We limited our search to ZIP codes with at least 10 residences for sale. This year, that meant that Los Altos Hills, Calif., didn't make the cut, even though it's been among the priciest ZIP codes in the past (No. 2 on our 2013 list). Also, our calculation of median price factors in short sales and bank-owned foreclosure listings, but excludes homes bundled into REO bulk sales. And, since our list is based on asking prices of homes for sale rather than completed sales or property tax records, it may not fully represent the areas we highlight. Neighborhoods where new, deep-pocketed buyers are tearing down older homes and replacing them with McMansions might include pockets of longtime homeowners of more modest economic means who live in smaller structures. However, our list is intended to provide a snapshot of each ZIP code’s current activity. Finally, in some cases a ZIP may appear more than once on our list if it’s shared by two or more towns. For example, Coral Gables (No. 385) and Coconut Grove (No. 449), Fla., share 33133.