During the first three months of 2011 the median price of a home sold in Honolulu was nearly $580,000, according to the latest data from the National Association of Realtors. That gives Honolulu the distinct honor of being the most expensive housing market in the nation.
Here is a list of where home prices are the highest in cities across the U.S., from Honolulu to New York to San Francisco
Median home price: $579,300
During the first three months of 2011 the median price of a home sold in Honolulu was nearly $580,000, according to the latest data from the National Association of Realtors. That gives Honolulu the distinct honor of being the most expensive housing market in the nation
It's not just the lure of balmy weather and palm trees that keeps homes pricey. Hawaii is one of the most remote places on earth and many building materials have to be shipped long distances to get there.
Land is also limited and the terrain difficult to navigate, which helps to inflate property values and construction costs. Honolulu is hemmed between ocean and mountains, leaving little land left that is easy to develop. Much of the land that remains on Honolulu's home island of Oahu has been set aside for preservation, military or agricultural purposes, leaving a small fraction for home building
Luckily, many Hawaiians are better prepared to afford the sky-high prices: Residents' median household income is $81,000, about 25% higher than the national median, according to Wells Fargo Bank.
2. San Jose, Calif.
Median home price: $545,000
Silicon Valley's tech millionaires and other residents have seen their home values plunge dramatically, but they're still holding some of the most valuable properties in the nation.
Home prices in the region have fallen 36% from their peak, according to Wells Fargo. Still, the metro area market is anything but cheap.
Prices in many coastal California communities have remained high due to tight regulations, strict building codes and the tough-to-build-on hillsides and mountains that surround places like the Silicon Valley. That, added to a post-World-War II population boom during which many engineers, scientists and other technology experts flocked to the emerging semiconductor industry here, has kept demand for homes high.
3. Anaheim, Calif.
Median home price: $511,800
Before Disneyland was built here in 1955, Anaheim was a sleepy farming community of fewer than 15,000 residents. Orange groves gave way to tourism and real estate developers soon followed. Land in the swiftly growing Los Angeles-Orange County megalopolis became much more valuable as building sites than as farmland.
Then came the housing bubble — and real estate speculation drove prices into the stratosphere.
Anaheim's housing bubble inevitably burst and home prices fell some 40%. Prices have since stabilized. Yet despite the precipitous drop, median home prices are still lofty enough to rank the market as the third most expensive in the nation.
4. San Francisco
Median home price: $465,900
Home prices in San Francisco may be dropping but that doesn't mean that the "City by the Bay" has become a real-estate bargain.
The second most densely-populated city in the nation (behind New York) is a prime example of the old real estate maxim: "They're not making any more land." With so many people vying for so little space, prices can only fall so far. A 1,200 square-foot row home in town can easily fetch more than $500,000 and suburban houses are also equally expensive.
The area economy has always been a diverse mix of finance, trade, tourism and light industry. In the city's South of Market area, a once-struggling part of town is now a hot spot for "new media" and software companies: Twitter, Wired and Cnet Networks have all found homes here. The metro area unemployment rate dropped to 9.5% in April from 10.3% a year earlier. It's now close to the national average and far below California's 11.9%.
Home prices in San Francisco are more than 30% off their peak, according to Wells Fargo. Given that home prices have remained at a bottom for the past couple of years, they are not likely to decline much further. Should an economic recovery take hold, though, they are bound to start climbing again and that makes now a good time to buy, says local real estate agent Michael Mihelich.
5. New York
Median home price: $439,300
Just like its residents, New York's housing market has proven itself to be resilient during tough times. Home prices, especially in Manhattan and Brownstone Brooklyn, have held up well during the bust and should continue to do so, says Jonathan Miller, president of New York appraisal firm, Miller Samuel.
All told, the metro area's housing market is down a little less than 20% from the peak set in the third quarter of 2007, according to Wells Fargo. That's considerably better than the nation as a whole, where prices have dropped by more than a third.
In Manhattan, you won't get much more than a modest one-bedroom condo for $440,000. But you can get a lot more home for that sum in the outer borough neighborhoods and suburbs.
New York has two things helping it weather the economic storm: an acute shortage of land to build on and an ability to attract young people. On average, there are 28,000 New Yorkers crammed into each square mile of the five boroughs — and the people keep coming.
Young graduates flock to the city for high-paying jobs in finance, as well as lower-paying jobs in the arts and other industries.
In addition, New York University was named the number three dream school for students in the Princeton Review's 2011 College Hopes and Worries Survey. And then there are companies like UBS, the giant Swiss bank, which is moving back to Manhattan from Stamford, Conn., because it has become too difficult to recruit young talent: They all want to live in Manhattan