Forbes.com
This home Rancho Santa Fe, Calif., is listed at $825,000, and is nearly the least expensive in the neighborhood located just a half hour from San Diego.
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updated 12/1/2005 10:51:49 AM ET 2005-12-01T15:51:49

Some people will tell you to buy the most expensive house you can afford. But a real estate adage offers a corollary: It's unwise to buy the most expensive home in the neighborhood.

Sure, the best spread on the block comes with bragging rights. But the cheaper homes in the surrounding area can limit your appreciation potential and could even pull down the value of your house. Any sort of decline in the neighborhood will make your palace more difficult to sell. And even if none of the above actually happens, potential buyers who follow the conventional wisdom will avoid your property.

But purchasing the least expensive home in one of the nicest places — now that's a smart move.

Expensive neighborhoods are occupied by large, luxurious homes with well-groomed lawns; the streets may be lined with stately old trees; golf clubs, beaches and other amenities are often close by. Wealthy enclaves offer their residents better schools, public services and health care. For all those reasons, there will always be an upwardly mobile someone looking to buy into the neighborhood. And should you update and upgrade your cottage to put it more on par with the surrounding mansions, you can see your home value soar.

But just what does an entry-level home cost in the priciest parts of America?

Earlier this year, Forbes.com looked at the most expensive ZIP codes in the country, from Atherton, Calif. (where the median home price in 2004 was nearly $2.5 million), and Mill Neck, N.Y. (just under $2 million), to glamorous Beverly Hills, Calif. (more than $1.5 million). This fall, we are taking a second gander at the top ten ZIPs to determine just how little one would have to pay to own a home, any home, in each area.

In October 2005, the median sale price (the point where half the homes cost more) for an existing home in the U.S. was $218,000. In some of these ZIPs, bargains are priced at $1 million. In 92662, the code for Newport Beach, Calif., beach bum chic doesn't come cheap — the least expensive home on the market carries a price tag of more than $1.9 million. Hot to trot to 94027, also known as Atherton, Calif.? It will cost you around $1.4 million just to get in the door.

Not every place on our list was quite so pricey. In some neighborhoods, home prices reach vertiginous heights partly because of local restrictions — properties must be over a certain acreage, or multifamily developments are banned. Accordingly, even the cheapest homes will be spacious and situated on large plots of land. The second-lowest-priced house is a $1.85 million property, complete with stables and a swimming pool. The lowest-priced house is a $1.6 million palace, complete with a double-height master bedroom and indoor swimming pool.

But in other expensive areas, a few condos and smaller properties are able to mix with the mansions. In Rancho Santa Fe, Calif. (92067), for example, where you can easily find multimillion-dollar estates, a modest two-bedroom house is available for $689,000. The least expensive home we could find in the top ten ZIPs costs $480,000 and is considered quite the bargain in the Lake Tahoe ZIP code of 89402.

To compile the original list of the most expensive ZIP codes, we turned to OnBoard LLC, a New York-based data-collection company that sorted through public records for 2004. For Manhattan, which has a lot of cooperative apartments that tend not to show up on public records when sold, real estate appraisal and consulting firm Miller Samuel provided data. We used the National Association of Realtors' site to search for listings in each ZIP code, and confirmed asking prices with the listing brokers.

These prices may be a stretch for most Americans, but think of it this way: Once you live in the neighborhood, there's nowhere to go but up.

© 2012 Forbes.com

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