What's a better investment, real estate or the stock market? Over the last 20 years, in spite of the housing crash, you would have done better with real estate if you bought in one of the 20 U.S. cities where prices have risen the most.
That's a little misleading, of course. It doesn't take into account things like mortgages or property tax or maintenance and repairs, nor the advantages of having an investment you can also call home. But it's fascinating to see how steeply values have risen in some communities, making many homeowners wealthy in the process.
A recent study by the personal finance site GOBankingRates used data from Zillow comparing median home prices in January 1998 and January 2018 in 25 cities around the country to identify those where prices had gone up the most. It's probably not surprising that 14 of the 25 cities where prices rose the fastest are in California, where the tech boom has pushed home values into the stratosphere. Four are in Florida, perhaps the result of Baby Boomers growing older and relocating to that popular retirement state. But, somewhat surprisingly, three are in New Jersey. And two, Seattle and Bellevue, are in western Washington, another area where the high-tech industry has brought an influx of money and people.
It's interesting to take a look at the full list of 25 cities where prices have gone up the most since 1998. Even in number 25 on the list, Oakland, California, owning a home for 20 years would have earned you an average $443,000 in profit according to GOBankingRates' research. Here's what the top 10 would have gotten you:
1. Encinitas, California
Estimated average profit from selling a home bought in 1998: $1.12 million
Ninety-five miles south of Los Angeles and 25 miles north of San Diego, Encinitas is a fun, beachy and historic town with average high temperatures of 72. Sounds like a really nice place to live which may be why it's the most profitable place in the country to have owned a home for the past 20 years.
2. El Segundo, California
Estimated average profit from selling a home bought in 1998: $967,100
This Los Angeles County city has a population of less than 17,000. The biggest employers are Raytheon, Northrop Grumman, and Boeing. Advances in these industries, along with proximity to the burgeoning LA economy helped push median home prices to $1.25 million this year.
3. West Hollywood, California
Estimated average profit from selling a home bought in 1998: $921,800
Bounded by Beverly Hills to the West and Hollywood to the East, West Hollywood is home to the Sunset Strip. Like many cities that are adjacent to desirable areas, West Hollywood has seen home values rise rapidly when residents were priced out of tonier places nearby. Twenty years ago, buying a home here would have been a relative bargain with median prices at $175,000, the lowest among the top 25 most profitable cities.
4. San Francisco, California
Estimated average profit from selling a home bought in 1998: $884,000
Even back in 1998, home prices here seemed high with the median over $300,000, making San Francisco the most expensive then among the top 25 most profitable cities. Prices have gone up dramatically since then, reaching a staggering $1.61 million this year, according to one study.
5. Anna Maria, Florida
Estimated average profit from selling a home bought in 1998: $866,800
Anna Maria, Florida, on Anna Maria Island is a tiny city with only 897 households, according to the 2000 census. It's part of the Bradenton-Venice-Sarasota metropolitan area.
6. Santa Clara, California
Estimated average profit from selling a home bought in 1998: $804,900
Santa Clara owns and operates Silicon Valley Power Company, a municipal not-for-profit utility which powers such companies as Yahoo and Intel. Like other Silicon Valley towns, it's seen housing prices skyrocket as the tech industry continues to grow.
7. Kailua, Hawaii
Estimated average profit from selling a home bought in 1998: $785,900
This town in Honolulu County went from a sleepy beach town to a major tourist destination almost overnight, thanks to former president Barack Obama who was born in Hawaii and spent time at Plantation Estate in Kailua several times during his time in office. Locals are apparently unhappy about the influx of visitors. If they decide to sell, at least they'll make a tidy sum.
8. East Palo Alto, California
Estimated average profit from selling a home bought in 1998: $770,300
This town has the wrong name because it's actually directly north of Palo Alto. Left behind during the dot-com boom, East Palo Alto began seeing gentrification in 2000, as developers built homes and employees of Facebook and Google began moving in. It has the distinction of being the most profitable city to own a home for the past 20 years in percentage terms. Home prices more than quadrupled, beating the S&P 500 by more than 50 percent.
9. Milpitas, California
Estimated average profit from selling a home bought in 1998: $747,800
Milpitas is part of the San Jose metro area, one of the most expensive in the country. Cisco is its top employer. In fact, the city has a bigger proportion of its population employed in the computer and electronics industry than any other city in the country. In 2014, Money named it one of the 50 best places to live in the United States.
10. Berkeley, California
Estimated average profit from selling a home bought in 1998: $720,300
Berkeley is home to the University of California's oldest campus, and the Lawrence Berkeley National Laboratory. A socially progressive town, it has few chain stores for a city of its size, due to local regulations intended to support small and local businesses.