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The most expensive ZIP codes of 2005

What's in a ZIP? In this case, some of the priciest real estate in the country.
Atherton, Calif.  94027: Home to some high-powered, high-tech CEOs, this area tops's list of most expensive ZIP codes.
Atherton, Calif.  94027: Home to some high-powered, high-tech CEOs, this area tops's list of most expensive ZIP
/ Source: Forbes

What's in a ZIP? In this case, some of the priciest real estate in the country.

From Beverly Hills to TriBeCa, from notorious enclaves of mansions and lush lawns to little-known niches of wealth, we looked at ZIP codes around the country to find the ones where home prices were the highest last year.

Many of these neighborhoods are rarified places, of course. They are close to beaches and golf courses and prime yacht moorings — or at least within spitting distance of the power centers that are the sources of great wealth. Thanks to their high tax bases, these areas also usually offer better schools, health care and public services — not to mention such amenities as better exotic car mechanics, caterers and gardeners. The homes are often proof of the good life, if not always good design. Penthouses and mansions abound, filled with the most expensive fittings, such as antique marble mantles, gunite pools and hand-painted hallways.

But there were some surprises. The list is testament to the costs of living in California, with half of our top ten ZIPs in that state, and nearly two-thirds of our top 25. It's not such a shock when you consider that California home prices increased nearly 100 percent between 1999 and 2000, according to the U.S. Office of Federal Housing Enterprise Oversight (OFHEO). But the real estate market in some locations has made a u-turn since the dot-com bust — several of the most expensive places are in or very close to San Francisco and Silicon Valley. Meanwhile, the best known ZIP code in California, 90210, also known as Beverly Hills, ranked only No. 15.

Then there were the places that indirectly fed off of West Coast money. Two of our top 25 ZIPs were in tax-free Nevada, but not in Las Vegas, where home prices shot up more than 40 percent between 2003 and 2004, according to OFHEO research. Instead, they were old-money resort bastions around Lake Tahoe.

And while more diverse than postal areas such as the Upper East Side of Manhattan or Lake Shore Drive in Chicago, have more than their fair share of high-priced properties, urban areas usually ended up lower on our list. That's because those ZIP codes are more diverse than those that encompass exclusive and relatively homogenous suburbs where home prices don't dip below $1 million.

For example, a townhouse might easily sell for $15 million in Manhattan, a far higher price per square foot than a Montecito mansion, but a sliver of a studio on the next block may ring up at $300,000, bringing down the median home price. An exception is TriBeCa, a trendy neighborhood in downtown Manhattan, where commercial spaces have been turned into large, luxurious lofts for the hip and well-heeled. Here, in 10013, last year's median home price was more than $1.6 million.

In case you ever wondered, ZIP stands for Zoning Improvement Code. A relatively recent innovation, the codes only came about in the 1960s when the U.S. Postal Service decided it needed to figure out a better way to manage an increase in population, as well as an influx of business mail.

Before that, the postal service only used addresses, although large cities have had postal zones since 1943. Now, there are more than 40,000 ZIP codes. The first of the five numbers refers to a broad region, from zero for the Northeast (draw what conclusions you will) to nine for the West Coast. The second and third digits narrow to population centers, and the last two represent individual post offices or postal zones.

A ZIP code can include a very wealthy neighborhood along with a less-pricey one, which means there are some limits to our list. This may be why areas such as Jupiter Island, Fla., and New York's Hamptons didn't make the cut.

Also, though median home price is a solid gauge of a real estate market, it doesn't exactly measure the top prices in an area. The median is where half of all sales were above and half were below. So, an estate could go for $30 million and another for $20 million. But if you have enough $200,000 condo sales, the median could end up being similar to that for a place where the top price is just $5 million, but homes start at $900,000.

We had OnBoard LLC, a New York-based data-collection company, compile our list of the most expensive ZIP codes around the country. For Manhattan, which has a lot of cooperative apartments, we looked to real estate appraisal and consulting firm Miller Samuel.

As with most things, the data aren't flawless. In some places, home sale prices don't need to be publicly recorded. Even if they are, prices can be wrong or records less than perfect. The companies may not have information for all of the thousands of ZIPs, and we threw out areas with five or fewer sales last year.

Once the most expensive ZIPs had been identified, we went looking for houses that characterize each market, though their prices may be high above the median. Some are so opulent and expensive that you might wonder whether people actually live there. Indeed they do, and they pay the prices to prove it.