Deciphering Forbes' "most expensive" zip codes

What constitutes an expensive zip code? Depends who you ask and what you ask them.

In Forbes' 2013 list of America's Most Expensive ZIP Codes, Silicon Valley dominates the list with median home prices of more than $5.4 million. According to the article:

Since our list is based on asking prices rather than closed sales or tax assessments, it may not be completely representative of the communities featured — for example, neighborhoods that have become swanky in the past few decades could contain pockets of longtime residents in more modest homes. Rather, our list is a snapshot of each market's current activity.

"This is a view of everything actively for sale in these markets," explains Michael Simonsen, chief executive of Altos Research. "It's the experience you'll have if you want to buy — or sell — a home today in any of them."

We agree – active listing prices are a great input to understanding the market, and trends in these prices often lead the eventual movement of sold prices in an area. But...they don't by extension seem to reflect the experience in many of these markets.

List price is just one view (the ASK) into the market place and based on our findings, we'd argue its bias increases with absolute price. We can illustrate this by incorporating additional views such as OFFER and SOLD price prices for these zips. It is impossible to avoid data bias – we simply can't evaluate all possible data points simultaneously. And we note bias in our own findings on the next page.