If you are thinking of living in Newport Beach, CA, you have excellent taste. That is the most expensive U.S. city to live in, with the cost of an average home about $1.83 million.

Why live in a costly neighborhood?

One of the benefits of living in the priciest real estate is you are more likely to get your money back when it comes time for you to sell your property. With the current slow-down in real estate markets throughout the country, only the most expensive ones are holding the line on prices, according to realtors in those areas. Anyway, if you have the money to live in a nice neighborhood, why not. For example, if you strike it rich from short selling penny stocks, you could easily afford  multiple homes in these neighborhoods. Actually there are five cities in California which are among the ten most expensive places to live. Besides Newport Beach, they include Palo Alto, San Francisco, La Jolla, Pasadena and Santa Barbara.

Other expensive cities include Rye, NY, Greenwich, Conn., Wellesley, Mass, and Honolulu, Hawaii.

Better Services

Expensive neighborhoods usually come with exclusive features. For example, the residents of expensive areas generally receive superior services, such as school, shops, parks and nearby conveniences.

Exclusive areas are valuable. Try selling that home you paid $1.83 million for in a less expensive area. In this economic climate, you’d be lucky to get one fifth of the price for it. However, the priciest real estate in the most valuable neighborhoods remains stable in all economies. It may be well worth to pay more for a home in an exclusive area than to economize somewhere else, where you are not likely to recover your price if the market goes down.

California, the Land of Sunshine and Beaches

People love living in warm climates, with such features as oceans or mountains to enliven the landscape. California is one such place and the fact that the real estate there is so expensive reflects the loveliness of the surroundings. If you are unwilling to pay millions for your home, you can think of living in Detroit or the Midwest, where homes are among the most economical in the country.

What will happen when the Economy Recovers?

If you are wondering whether real estate prices will ever recover, the pundits say they will, but it may take a long time. By that time, foreclosures will be rampant and prices will be lower than ever. One thing you can count on, however, is that the pricey areas will undoubtedly still be pricey.

There is some good news: Mortgage rates remain at their lowest point in nearly 60 years, and prices are settling in several markets. Real estate is becoming more affordable and a home is primarily a shelter once more, instead of a speculative investment.

Meanwhile, some see another year of value declines in 2011. Upside-down loans proliferate, and unemployment remains high. If you can hold on a little longer, you may be all right in the long run. And remember: homes are still selling and people are still buying.