The Most Expensive Cities?

By Steve Gillman - 2011

Which are the most expensive cities for buying a home in the United States? That's not as easy as you might think to answer. There are a number of ways to measure these things. The average home prices could be used, for example, without other considerations. That's a relatively simple measure, but it ignores the job and income situation.

Often a ratio is used to determine where it is expensive to buy a home. The most expensive cities are those where the ratio of average home price to median salary is highest. In other words, houses that are a little more pricey can be more affordable if wages are a lot higher in a given locale. That's one of the criteria used for a recent article in Forbes, titled; America's Most Overpriced Cities.

They found that Los Angeles, California was the most expensive place in the country to buy a home. Fresno, California and Miami, Florida took second and third places. The fourth city on the list is a good example of how difficult it is to answer the question for an individual buyer.

McAllen, Texas has cheap clothing, gas and food, and even the houses go for a median price of just $107,000, which is much lower than many areas of the country. But because of the low median salary there ($33,700 versus $64,200 nationwide), it is rated as one of the most expensive cities. If you happen to have a decent job there, though, or if you were given a choice to transfer there at the same rate of pay, it would be a cheap place to live and to buy a house.

Another problem with survey like the one done by Forbes, is that they must by nature set criteria for inclusion that exclude some towns. In this case they looked at only large cities (metropolitan area of over $600,000). While there have to be some criteria used, in this case they leave out a lot of places you might consider living.

There is another, more fundamental problem with the methodology used for measurements like this. It becomes obvious when you see that there are several cities in southern Florida on the list. It is true that houses are still expensive in Miami, Fort Lauderdale, and other areas of Florida. But condominiums are not.

For example, in Naples, Florida (not on the list because of the small metropolitan area), a decent three-bedroom house in a nice neighborhood will cost you at least $200,000. But you can get the same square-footage and more amenities in a condo for under $100,000. The monthly costs will be less as well, despite the association dues, because of lower property taxes and insurance costs.

Clearly, a survey that looks at only the average prices of housing does not answer the question which most people would like answered for a prospective new hometown; Are there many places to buy that I can afford. So while it is fun and interesting to look at a list of the most expensive cities, if you have a personal interest you might want to do a bit more research on your own.

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