(Bloomberg)—“A dollar today isn’t what it used to be, particularly when it comes to real estate,” says Senior Economist Aaron Terrazas in a recent report from Zillow Research.
The Zillow report looks at how much real estate one dollar can buy in square inches. At the national level, the report found one dollar can buy 1.07 square inches of the average home, down from 1.23 square inches a year ago, and 2.09 square inches in 1998. But location matters -- so while one dollar buys a little more than one square inch nationally, it buys only about 40 percent of an square inch in New York or Los Angeles.
Bloomberg News scaled this calculation to a more tangible object -- a king-sized mattress, which measures about 42 square feet.
The top seven most expensive neighborhoods in the U.S. to buy the space needed for a king mattress are all in Palo Alto, California. In the number-one-ranked Old Palo Alto neighborhood, this would amount to more than $97,000.
Only two non-Palo Alto neighborhoods are among the top 10. In the number eight location, West Village of New York City, the equivalent space goes for just under $80,000 and in nearby SoHo, ranked No. 10, it sells for around $78,000.
To put the West Village price in perspective, the cost for space needed for a king-sized bed in Williamsburg, a Brooklyn neighborhood, is just under $43,000.
What This Means for Investors
While mainly a recreational exercise, this calculation reveals a dramatic geographic shift in real estate pricing. In 2008, the top 20 neighborhoods by square foot were all in New York. This year, only five of the top 20 remain in New York, with the remainder all in California.
To contact the reporters on this story: Alex Tanzi in Washington at [email protected]; Wei Lu in New York at [email protected] To contact the editors responsible for this story: Kristy Scheuble at [email protected] Chris Middleton
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