Are You Overpaying for Where You Live?

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Paying A Premium

Some communities, such as Atherton, Calif., have not suffered as badly as less affluent suburbs facing the fallout of the subprime mortgage mess. The San Francisco suburb, which has no sidewalks and no businesses, is covered with mansions ranging from less than $1 million to more than $20 million. Many are occupied by the who's who of Silicon Valley—among the residents are Eric Schmidt, chairman and CEO of Google (GOOG), Charles Schwab, the founder of brokerage Charles Schwab (SCHW), and Meg Whitman, CEO of eBay (EBAY).

"This is not the kind of place where people would have subprime mortgages," Atherton Mayor James Janz says. "If there's been any adjustment here, it's been minor."

In Highland Park, Tex., where wealth has been passed down for generations, residents are willing to pay a premium for good schools and dedicated firefighters and police. It might be pricey to fill up your tank in downtown Highland Park, but cheaper gas is only a couple miles away, says Meredith McKee, an agent with Briggs-Freeman Real Estate Brokerage, a boutique firm that specializes in the Highland Park area.

"Not everybody is incredibly wealthy," McKee says. "People will make major sacrifices to have children in the [Highland Park] schools. They might not be able to afford a house here, but they can make a lease payment."

The Employment Factor

Some residents of upscale Leawood, Kan., have been hurt by layoffs at Sprint (S), one of the area's largest employers, says Jonathan Rich, executive pastor of Christ Community Church in Leawood. But residents could easily save money by moving to a neighboring town, where homes are less expensive and schools are still decent, he says. "People aren't really squeaking by in Leawood," Rich says with a laugh. "It's one of those things, if you have to ask the price, you shouldn't be living there."

In Bloomfield Township, Mich., however, some wealthy residents, particularly those who have lost high-paying jobs, are being forced to look elsewhere, Lovati, the Detroit area agent, says. Executives have not been immune to recent carmaker and financial sector layoffs, which have had rippled through the economy, she says.

One of her listings is a brand-new, 9,000-square-foot, foreclosed home that was never lived in (the approval stickers are still on the windows). It was assessed at $3.1 million; it's listed at $2 million, and she's gotten a cash offer for a fraction of that amount. The former owner was a financial executive who built the home but could no longer afford to make the payments on his $2 million mortgage, she says.

Having a Bloomfield zip code is "no longer a requirement," Lovati says. "People know they can move to the township next door for half the prices."

Click here to find a state-by-state listing of the most expensive suburbs to live now.

Gopal writes about real estate for BusinessWeek.com in New York.