The most expensive ZIP codes of 2005

In case you ever wondered, ZIP stands for Zoning Improvement Code. A relatively recent innovation, the codes only came about in the 1960s when the U.S. Postal Service decided it needed to figure out a better way to manage an increase in population, as well as an influx of business mail.

Before that, the postal service only used addresses, although large cities have had postal zones since 1943. Now, there are more than 40,000 ZIP codes. The first of the five numbers refers to a broad region, from zero for the Northeast (draw what conclusions you will) to nine for the West Coast. The second and third digits narrow to population centers, and the last two represent individual post offices or postal zones.

A ZIP code can include a very wealthy neighborhood along with a less-pricey one, which means there are some limits to our list. This may be why areas such as Jupiter Island, Fla., and New York's Hamptons didn't make the cut.

Also, though median home price is a solid gauge of a real estate market, it doesn't exactly measure the top prices in an area. The median is where half of all sales were above and half were below. So, an estate could go for $30 million and another for $20 million. But if you have enough $200,000 condo sales, the median could end up being similar to that for a place where the top price is just $5 million, but homes start at $900,000.

We had OnBoard LLC, a New York-based data-collection company, compile our list of the most expensive ZIP codes around the country. For Manhattan, which has a lot of cooperative apartments, we looked to real estate appraisal and consulting firm Miller Samuel.

As with most things, the data aren't flawless. In some places, home sale prices don't need to be publicly recorded. Even if they are, prices can be wrong or records less than perfect. The companies may not have information for all of the thousands of ZIPs, and we threw out areas with five or fewer sales last year.

Once the most expensive ZIPs had been identified, we went looking for houses that characterize each market, though their prices may be high above the median. Some are so opulent and expensive that you might wonder whether people actually live there. Indeed they do, and they pay the prices to prove it.

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