America's Most Affluent Neighborhoods

Forbes

These towns have prospered in recent years--but some have tougher times ahead than others.

In an economy like this, even the richest communities across the country are feeling the pain.

Take Southlake, Texas. With an estimated median household income of $172,945, this Dallas suburb is the most affluent neighborhood in the country, mostly due to real estate growth. In 2005, the area doubled its town square shopping center, which bolstered the median household income by over $42,000 since the 2000 census. (Even accounting for inflation, that's still a big bump.)

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Brian J.L. Berry, dean of the School of Economic, Political and Policy Sciences at the University of Texas at Dallas, says that what separates Southlake from its white-collar counterparts is undoubtedly its town square. "It is an upscale community with an expression of that status in its town square," says Berry. "If there is anything special about the suburb, it is that square."

The only problem is that there's not much room for Southlake to grow. Add to that the highest nationwide unemployment rate in 14 years and the second-lowest consumer confidence index in 34 years, and it's clear that even neighborhoods like Southlake have the potential to be affected by the recession in some way.

Behind the Numbers

To determine America's most affluent neighborhoods, we looked at average median household income estimates--in communities with populations between 20,000 and 64,999--from 2005 to 2007, provided in the U.S. Census' American Community Survey. On Dec. 9, the Census released data estimates on communities of this size for the first time. These include cities, towns, villages as well as census-designated places (CDP), a type of neighborhood that lacks a separate municipal government, but otherwise physically resembles one of these other places.

Topping the list is Southlake, followed by affluent New York, San Francisco and Washington, D.C., suburbs. But the list could see some shuffles in the months or year ahead.

The Tempe, Ariz.-based Institute for Supply Management's index of manufacturing activity--which the trade association releases each month--fell to 36.2 in November 2008 from 38.9 in October. (An index of 50 or lower indicates that an economy is contracting.) That's a 26-year low.

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Unfortunately, it's not just manufacturing jobs that the U.S. economy is currently shedding. Wall Street, one of the biggest employers of white-collar workers in the nation, lost 16,000 jobs in October alone, according to New York state labor market analyst James Brown. Those who still have jobs in the industry are unlikely to receive big bonuses like they have in the past. Those bonuses often take care off the upcoming year's mortgage payments. Without that extra injection of cash, the homeowner moves, downgrades or can't pay his taxes, decreasing the neighborhood's affluence.

"We know that, in particular, bedroom communities that have been affected by job losses are going to be hurting and certainly won't be insulated from the economic downturn," says Rick Sharga, senior vice president at RealtyTrac, an Irvine, Calif.-based listing firm that tracks real estate foreclosures.

For bedroom communities like Darien, Conn., that depend on New York's financial industry, town-center commerce and municipality taxes on pricey homes, these aren't encouraging data points.

Same goes for Los Altos, Calif., where most residents are employed by technology companies, which are currently scaling back (search and advertising behemoth Google has said that it will significantly reduce the number of independent contractors it employs). Westport, Conn., a bohemian bourgeois village with a 60-minute commute to Manhattan, also falls into this group.

Good Time for Government Work

Some affluent communities, however, may emerge from this recession relatively unscathed. Places like Potomac, Md., and McLean, Va., whose populations consist primarily of government officials--jobs that tend to remain safe during economic downturns--will fare better.

And upscale college towns, such as University Park, Texas, which is home to Southern Methodist University and is located just five miles north of downtown Dallas, tend to house more university administrators than investment bankers.

Top 5 Most Affluent Neighborhoods

1. Southlake, Texas
Median Household Income: $172,9452. Darien, Conn.
Median Household Income: $160,2743. Los Altos, Calif.
Median Household Income: $158,7454. McLean, Va.
Median Household Income: $156,2925. Potomac, Md.
Median Household Income: $154,370

Click here for the full list of America’s Most Affluent Neighborhoods

No matter how bad the economy gets, it's unlikely that suburban Chicago's Lake Forest, Ill., will become another Flint, Mich., the devastated former auto-industry town with long-running unemployment and poverty.

While certain employment sectors in just about any community may suffer in a recession, neighborhoods such as Lake Forest--where the median household income is $150,000--don't rely on one industry for survival. For those with this kind of wealth, a couple of down years don't equal a lack of food on the table. A downturn just means forgoing that second home purchase.

However, those who already signed a mortgage on a second home could face the same fate many are currently experiencing on their first homes.

"In all likelihood, the people in the more affluent neighborhoods weren't exposed to the same risky, toxic [mortgage] financing," says Sharga. "However, there are anomalies. Those highly affluent, multiple-property owners who have lost jobs may face several foreclosures."

Living in one of America's most affluent neighborhoods has its privileges--among them, not feeling the recession in quite the same way as everyone else.

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