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What makes a hot zip code hot?
The hot zip codes aren't all glitz and glam. They're affordable, close to the city or on the coast.
May 5, 2005: 10:56 AM EDT
By Sarah Max, CNN/Money senior writer
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Salem, Ore. (CNN/Money) Scrutinize our latest list of zip codes with the strongest price appreciation and you might wonder how some of these places could ever be considered "hot."

The neighborhoods are still a little rough around the edges. The houses need updating. Yoga centers and martini bars are few and far between. Paris Hilton, the aficionado of all things "hot," has never heard of these places.

(Click here to see the original story on hot zip codes.)

So we asked local real estate agents to tell us what they saw happening in New Jersey's 08008, Seattle's 98126, Chicago's 60632 and other zips that made our list.

Three distinct trends have influenced home prices in these zip codes, said David Stiff, senior economist for Fiserv CSW, which provided the data.

1. Affordability is everything.

Looking closely at the zip codes with the most appreciation over the past five years, you won't see places like Beverly Hills, Beacon Hill or East Hampton because home prices in these areas though increasing are just too dear.

In the priciest metros, buyers must search far and wide for affordable housing.

"In Boston, all of these zip codes are far from downtown," said Stiff, referring to New Bedford, Lawrence and Worcester. "They are former mill towns that are having a resurgence in price because they're so affordable."

In Los Angeles, the hot 'hoods are in the eastern suburbs where median home prices are still under $500,000. Prices in Rialto, Calif., have appreciated 191 percent, but the median home price, $270,000, is still extremely low for the area.

The same is true in the San Francisco Bay Area, which has some of the highest home prices in the country.

"People are trading distance for dollars," said Ray Brown, a real estate agent with Pacific Union, explaining that some of the zip codes with the greatest appreciation are near Sacramento, which is about 80 miles away. Some people commute the distance.

2. Urban trumps suburban.

While buyers in the priciest metros have no choice but to head to the suburbs, in cities where housing is relatively affordable buyers are shopping for property within city limits.

In Chicago, married couples are no longer fleeing the city for the suburbs and empty nesters are leaving the suburbs and moving back into the city, said Nancy Suvarnamani, president elect of the Chicago Association of Realtors.

"People want to live in Chicago and are willing to explore and purchase in areas that were once, not long ago, considered undesirable," she said. Because a lot of the established areas are too expensive, buyers are going to Logan Square (zip code 60639) and Uptown (60640).

"Irving Park and [the areas near it] are highly desirable areas because they contain large older, single homes, with a lot of character," she said. "People can purchase single-family homes in this area for under $500,000, and this is no longer possible in many Chicago neighborhoods."

Archer Heights (60632) and adjacent Brighton Park (60638), meanwhile, have experienced tremendous appreciation because of the expansion of Midway Airport, she noted. People want to live close to where they work, which has a ripple effect on the entire neighborhood.

The same trend is playing out in Seattle.

There, the neighborhoods with the strongest appreciation range from still-affordable West Seattle (98106), where the median home price is $233,000 to the more established Queen Anne-Magnolia (98109) where the median priced home is $556,000.

"But what's similar is they are all within a stone's throw away from downtown," said Edward Krigsman, a real estate agent with John L. Scott. Although Microsoft and other large employers are east of the city, he said, buyers are looking for reasonably priced areas within the city.

"The closer the better, the cheaper the better," Krigsman said.

3. Go coastal.

In the New York and Philadelphia metros the zip codes with the most price gains are primarily New Jersey shore towns.

"There is huge demand for waterfront homes," said Stiff. "Right now, if you look at the Florida coast, the Jersey shore you see second-home buying driving appreciation."

According to Bonnie Fitzgerald, president of elect of the New Jersey Association of Realtors, buyers have been buying what were once year-round houses, fixing them up and turning them into vacation homes.

Although prices in these New Jersey shore towns have increased tremendously, she said, they're still a relative bargain compared with beach towns on Long Island.

"Some of these places have some stigma of 'Well that's not the best area to live,'" she noted. But if they're on or near the beach, stigma doesn't matter. "People renovate the houses and the whole demographics of the town changes."

Click here for the top zips in 10 metro areas.

Click here to see the gallery of homes on the market in the top zip codes.

Ultimate home guide 2005

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