The Cheapest Digs in the Richest ‘Hoods

Plenty of people in the real estate business will tell you to buy the most expensive house you can afford. But is that really a smart move?

No question, the nicest pad on the block will be good for the all-important bragging rights. The cheaper homes in the surrounding area can still limit your appreciation potential, however, and might even pull down your home’s value, depending on market conditions. Any sort of decline in the neighborhood will make your place tougher to move, when and if you want to sell. Not to mention that prospective buyers who actually employ conventional wisdom will inherently avoid your property.

On the flip side, what about buying a house that is the least expensive in one of the nicest towns? Now you’re thinking!

Across the country, the most expensive neighborhoods are occupied by luxurious homes with immaculate landscaping, stately trees. Wealthy enclaves offer better schools, public services and health care as well as nearby beaches and country clubs in many cases. There will always be people looking to buy into such a neighborhood for all of the above reasons, and if you are willing to update / upgrade your modest property to put it more on par with the surrounding mansions, your property value will soar.

Easy enough, right? Well, brace yourself for the list of cheapest home prices in the 10 ritziest zip codes in the United States, according to Forbes (median home price in parentheses).

• Atherton, Calif. ($2,496,553) – $1,395,000
• Montecito, Calif. ($2,176,251) — $875,000
• Rancho Sante Fe, Calif. ($2,144,254) — $689,000
• Newport Beach, Calif. ($2,046,577)– $1,925,000
• Mill Neck, N.Y. ($1,948,636) — $899,000
• Ross, Calif. ($1,910,263) — $850,000
• Crystal Bay, Nev. ($1,806,962) — $480,000
• Alpine, N.J. ($1,773,880) — $1,049,000
• Glenbrook, Nev. ($1,765,000) — $1,395,000
• New Vernon, N.J. ($1,760,553) — $1,590,000

That’s how little one would have to pay to own a home, any home, in each area.

As of October 2005, the median sale price for an existing home in the U.S. was $218,000, meaning half cost more and half less. In some of the areas listed above, “bargains” are priced at $1 million. In Newport Beach, Calif., the least expensive home on the market is just a shade under $2 million. In Atherton, Calif., a town nestled between San Francisco and San Jose, it will cost you around $1.4 million just to get in the door.

These are extreme cases, of course. Home prices reach ridiculous heights partly because of local zoning laws and restrictions — properties must be over a certain acreage, no multifamily units or developments, et cetera. In such towns even the cheapest homes will be spacious and situated on large plots of land, pushing prices through the roof. But in some expensive areas, a few condos and smaller properties are able to rub shoulders with the palaces.

In Rancho Santa Fe, Calif., where you can easily find seven-figure estates, are also modest two-bedroom houses available for $600,000 - $700,000. The least expensive home to be found in any of Forbes’ top ten pricey ZIP codes costs $480,000 and is considered quite the steal in Crystal Lake, Nev., on the shores of Lake Tahoe.

The original list of properties was compiled by OnBoard LLC, a New York-based real estate data collection company that sifted through countless public records for 2004. In areas such as Manhattan, in which a lot of cooperative apartments that may not to show up on public records are sold, consulting firm Miller Samuel provided data. Data from that particular appraiser and the National Association of Realtors website was used to search for listings in each of the above areas, and asking prices were then with the listing brokers.

Yes, these prices may be a stretch. But at least there’s nowhere to go but up.