New data from Realtor.com indicates that luxury home prices in certain markets around the country are spiraling through the roof, and the trend does not appear to be cooling anytime soon. Researchers combined data on markets where median list price exceeds $1 million and markets where median list prices have increased the most to identify these “hot” ZIP codes.
The results are:
- Santa Monica, California: 90401
Median list price in this market is $3,045,000, and prices rose 60.7 percent over the past 12 months. - West Newton, Massachusetts: 02465
Median list price in this ZIP code is $2,219,000, and prices rose 60.4 percent over the past 12 months. - Palo Alto, California: 94301
Median list price in this market is presently $5,599,000, and prices rose 59.1 percent over the past 12 months.
Interestingly, in this study the researchers chose to limit their list to two ZIP codes from each state “for geographic diversity.” As a result, California, which otherwise might arguably have had as many as seven of the hottest ZIP codes in the top 10, only posted two, Santa Monica and Palo Alto. This is important for readers to note because overlooking the decision in the methodology to skew toward geographic diversity might lead one to overlook other, comparable markets of interest if, in fact, your investing strategy relies on activities in hot markets.
Investor Insight: “Hot” ZIP codes can be a great place to buy (if you can get a good deal), but be careful, since market heat often equals market volatility.
Danielle Hale, chief economist for Realtor.com, observed, “While each ZIP code is hot for its own unique reasons, some common threads among the hottest in the country are relative affordability, popularity among Millennials, and strong economies as evidenced by low unemployment rates and high salaries.” That “relative affordability” is important: While Santa Monica’s 90401 ZIP code does post a median list price in excess of $3 million, for comparison, Silicon Valley’s least expensive listing at the end of 2017 was nearly that much.
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