In America's Richest Small Towns: Big Sales Stall

Home values are down in many of the country's most exclusive small towns. Sagaponack is again the most expensive in U.S.

By Venessa Wong

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Want to buy Billy Joel's Sagaponack home? Last month the piano man dropped the price on his oceanfront house on Long Island's East End again, this time from $19.9 million to $18.5 million. It started out at $22.5 million when he first listed the property in 2009.

And Joel is not alone. Across the U.S., prices last year continued to decline even in the richest neighborhoods. Sagaponack, a village with a population of only 582 (it swells during the summer), saw home values drop 14.5 percent from 2009 to 2010—yet it once again earned the No. 1 position on Businessweek.com's ranking of the Most Expensive Small Towns in the U.S. It held on to the top spot because, despite the dip, median home values were $3,406,640, the highest in the nation, according to real estate website Zillow.com.

Working with the website, Businessweek.com identified the 50 most expensive small towns (populations less than 10,000) nationwide where median home values are the highest. We evaluated data on 4,624 cities and census-designated places from November 2010, the most recent available. Some expensive communities, such as Bel Air, Calif., were not included as they are neighborhoods rather than cities or census-designated places. Of the 50 most expensive places—many of which are second-home markets—nearly half are in Long Island's Nassau and Suffolk counties and about one-quarter are in California. None of the towns in the ranking had a median home value of less than $1 million.

Biggest Price Declines

Values dropped in 33 of the 50 most expensive small towns. The biggest decline, 15.7 percent, came in Woodside, Calif., home to such tech billionaires as Oracle's (ORCL) Larry Ellison and Apple's (AAPL) Steve Jobs. Values in the second-most expensive town, Jupiter Island, Fla., were down 11.3 percent from a year ago, to just over $2.8 million, and in No. 4, Los Altos Hills, Calif., they were down 13.6 percent, to a bit more than $2.1 million.

In eight of these towns (five of which are among the top 10 most expensive), values were more than 10 percent below levels of a year ago. Nationwide, home values were down 5.1 percent, Zillow.com's data indicate.

Only 17 places experienced increases in home values. The winner was Kings Point, N.Y., a wealthy suburb of New York City on Long Island's Gold Coast, where prices rose 13.5 percent.

In the Hamptons, "prices have not yet rebounded," says Michael Schultz, vice-president in Corcoran's East Hampton office. With prices down, he expects activity to pick up in the first quarter this year.

Fewer High-End Sales

Home to wealthy Wall Streeters, corporate executives, and celebrities, the Hamptons saw both unit sales and prices down year-on-year after rising in early 2010. The third-quarter drop in the median sale price in the Hamptons-North Fork market was due to a shift away from high-end sales—only 11 homes sold at or above $5 million in the third quarter, down from 20 sales a year earlier, according to a report by Miller Samuel, a New York real estate appraisal services firm.