The most overpriced suburbs in America

By Matt Woolsey

updated 8:31 p.m. ET Feb. 19, 2008

While many of the nation's homeowners are worried about falling home prices, others would argue they're not falling fast enough.

You might find them in Santa Monica, Calif. There, it takes just over 17 years of total earned salary for the median-income household to afford the median-priced home. In Berkeley, Calif., it takes almost 15 years and for Passaic, N.J. households, it's a more reasonable 13 years.

To find the rest of the spots on our list, we used data from Demographia, a St. Louis-based demographic research firm that draws on U.S. Census data for areas considered suburbs in the nation's 50 largest metros. Based on these numbers, we calculated how many years of total salary it would take the median household to afford the median house to find the country's most overpriced areas.

Based on our numbers, California suburbs are the most difficult to afford. In addition to Santa Monica and Berkeley, where the median home costs $1.05 million and $752,500, respectively, they include Hawthorne, where it takes buyers 14.6 years to afford the $585,700 median-priced home.

Such prices make other areas on our list seem like a bargain. In Skokie, Ill., the median-priced home rings in at $396,300, and it takes the median-earning household 6.1 years to afford it. In Alexandria, Va., the median-earning household must wait 6.7 years to buy a $539,200 home.

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How do these suburbs reach such price heights? Much of it has to do with how homeowners, especially wealthier ones, cluster within cities.

When people move to an area, they often do so because of a job. That's why migration figures and job growth are invariably intertwined. As an expanding local economy lifts salaries, housing prices grow because buyers have the money to pay for better properties.

Salt Lake City is a perfect example. The metro's high job-growth rate has resulted in huge in-migration and a housing market where prices grew by double-digit percentages last year.

But the richest residents often head to the market's prime suburbs, which feature perks like pretty views, bodies of water and parks that are in short supply elsewhere.

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