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# Being a ‘Superstar’ doesn’t come cheap when it comes to SM
- URL: https://www.smdp.com/being-a-superstar-doesnt-come-cheap-when-it-comes-to-sm/
- Published: 2006-10-25T15:00:00.000Z
- Updated: 2026-10-23T21:48:06.000Z
- Author: Guest Author
- Tags: Opinion, Malibu, #archive-import

*By JODI SUMMERS*

California is full of what can be termed as “superstar cities” — places where a certain percentage of Americans would like to live, no matter the price.

Santa Monica, San Francisco, Beverly Hills, Malibu and Santa Barbara are some of our state’s superstar cities. With these cities — Manhattan being the quintessential example — there’s no more room to build there. Newcomers have to pay a premium to move in. Prices go up. The number of rich Americans keeps going up and the number of houses in Santa Barbara does not. The rich are pushed out by the richer, and before you know it, people are paying millions of dollars for houses that would go for $150,000 in St. Louis.

“The continuing shortages of housing inventory are driving the price gains,” confirms David Lereah, NAR’s chief economist.

Nationally, Beverly Hills leads the way as the most expensive U.S. real estate market, with an average sale price of $1.8 million, according to Coldwell Banker’s Home Price Comparison Index. With bittersweet pride, our Santa Monica is the market with the second most expensive homes in the country — average sale price of $1.77 million. Minot, N.D., was the most affordable market among 317 U.S. markets surveyed, with an average sales price of $132,333\. And how much snow do they have there today?

The report concludes that cumulative average sales price of a 2,200 square foot, four-bedroom, 2.5 bath, home in a middle-management neighborhood in the U.S. markets and in one Puerto Rico market is $423,950 — a 6 percent increase from in 2005 and up 57.5 percent from 2001\. After Beverly Hills and Santa Monica, the other top-10 most expensive U.S. real estate markets are: La Jolla at $1.76 million; Santa Barbara, $1.7 million; Palo Alto, $1.65 million; Newport Beach, $1.57 million; San Jose, $1.41 million; Greenwich, Conn., $1.4 million; San Mateo, $1.37 million; and San Francisco, $1.36 million. There are no homes, per se, in Manhattan.

“When you look at appreciation of home prices relative to the overall rate of inflation, these are the strongest increases on record,” observes Lereah.

Markets where prices were far higher than justified based on income, employment and other variables represented 39 percent of all single-family housing value in the first quarter of 2006\. As recently as 2004, only three markets, representing 1 percent of home value.

The top-10 most affordable U.S. real estate markets after Minot: Killeen, Texas, $140,310; Arlington, Texas, $140,975; Grayling, Mich., $144,250; Topeka, Kan., $148,050; Canton, Ohio, $148,333; Tulsa, Okla., $148,575; Billings, Mont., $150,141; Fort Worth, Texas, $151,250; and Cadillac, Mich., $151,530.

Home ownership is now at the highest rate in U.S. history — almost 68 percent of American households own their homes. Yet, the median price of a typical new home tripled between 1977 and 1997\. In 1989, for example, the average price of a new home was $148,800\. By 1999, it was $195,700.

U.S. home prices are some of the highest in North America, as well as the world, sites the Coldwell Banker Index.

High net worth individuals were focusing their real estate investment on Europe (21 percent of their investment portfolios) and the Asia-Pacific region (19 percent), according to the World Wealth Report by Merrill Lynch, a financial management and advisory company, and Capgemini, a consulting, technology and outsourcing services company.

The Index included 42 international markets. Home prices in Amsterdam, the Netherlands ($483,513 in U.S. dollars) are comparable to those in Bend, Ore. ($482,750); prices in Dubai, United Arab Emirates, ($374,332) compare to those in Portland, Maine ($375,500); Warsaw, Poland, ($317,586) compares to Atlanta, Ga. ($322,210); and Sydney, Australia, ($683,109) compares to Bellevue, Wash. ($658,000).

The most expensive international markets (in U.S. dollars) among those surveyed include: Milan, Italy, $1.81 million; St. Thomas, V.I., $1.45 million; Bermuda, $1.44 million; Dublin, $1.41 million; and Rome, $1.26 million. The most affordable international market tracked was Bogotá, Colombia, at $56,522.

Twenty-nine percent of the U.S. markets in the survey had home-price averages below the National Association of Realtors. U.S. median single-family home price of $225,700, and 47 percent of the U.S. markets in the survey averaged below $300,000.

Last year, the majority of metropolitan areas experienced historically strong annual increases in median existing-home prices, NAR concluded. A study of 149 metropolitan statistical areas shows 67 areas with double-digit annual increases in median existing single-family home prices; again support the theory of superstar cities. The price gap between superstar cities and the rest of the country could get even bigger in coming years if incomes of rich Americans continue to rise and the supply of houses in the cities remains fixed.

“Those markets that have been showing the highest appreciation rates and are most overvalued are continuing to see prices increase currently,” says Jeannine Cataldi, senior economist at Global Insight.

Naples, Fla., Salinas, and Port St. Lucie- Fort Pierce, Fla., were the three most overvalued markets, according to a Global Insight report on overvalued real estate markets. Overall, 17 of the 20 most overvalued markets are in California and Florida.

“Over the past few years, in South Florida, the Northeast, Southern California, San Francisco and Las Vegas, the traditional forces of supply and demand have been helped along by super-low mortgage interest rates — which fell to generational lows — and an extraordinary number of real estate investors who decided they’d had enough of the stock market and needed another place to put their investment cash,” is how real estate columnist Ilyce R. Glink explains the current market.

California is the superstar state; recently, a median-priced home in California cost $512,000, up from $452,680 in 2004\. Congratulations to those of you that own real estate. You have invested wisely.

*Originally published in the Santa Monica Daily Press print edition on October 25, 2006.* [Read the original PDF.](https://s3.us-east-1.amazonaws.com/smdp%5Fbackissues/102506.pdf?ref=smdp.com)