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High-Priced Homes in Southern California Continue to Increase; San Francisco Values Crested After Three Years of Rapid Gains
November 27, 2001
Homes valued at more than $1
million in Los Angeles and San Diego rose to their highest levels in nine
years during the third quarter, but luxury home values in the San Francisco
area turned markedly downward, according to the Prestige Home Index™
by First Republic Bank, one of California's leading providers of full-service
banking, investment management, and trust services.
The index, which has been tracking higher-valued homes since 1985,
found:
- San Francisco values fell 7.5 percent from the second quarter, with
an average home value of $2.21 million, down from the index's record
high of $2.39 million in the second quarter of 2001. Values today are
almost the same as they were in third quarter of 2000. - Los Angeles values increased 2.4 percent from the second quarter,
with an average value of $1.31 million. The last time the index reached
that level was in 1992, when the average value of a luxury home stood
at $1.49 million. - San Diego experienced the biggest increase in values of all three
regions, jumping 6.2 percent from the second quarter to $1.39 million
- the region's second highest quarterly value in the history of the
survey.
"Home values in Los Angeles and San Diego continued to rise even as the
economy slowed in the third quarter," said Katherine August-deWilde, Executive
Vice President of First Republic Bank. "At the same time, San Francisco
housing values fell from their highest levels ever, largely in response
to the technology slowdown in San Francisco and Silicon Valley."
First Republic Bank (NYSE: FRC) conducts the survey each quarter with Case
Shiller Weiss, a leading provider of automated property valuation services
and home price metrics to U.S. financial institutions.
San Francisco Bay Area Feels Impact of Slowdown
The 7.5 percent decline in the third quarter was the first drop in Bay Area
values since the beginning of 1999. In some portions of the region, real
estate agents saw even larger decreases in the third quarter and significantly
slower sales.
"We've seen practically a complete halt in transactions," said Scott Dancer,
a real estate agent with Coldwell Banker in Woodside. "The last quarter
of 2001 has been an adjustment period downward, anywhere from 10 percent
or 15 percent. In the first quarter of 2002, an adjustment of an additional
10 percent to 15 percent is likely, but this will be the bottom of the market.
The sellers are not going to go any lower than that."
The third quarter decrease is in sharp contrast to the past few years in
the San Francisco Bay Area. Since the first quarter of 1999, values have
risen from $1.46 million to a high of $2.39 million in the second quarter
of 2001.
Real estate agent Patti Lawton, of Calegari and Associates in San Francisco,
said the economic downturn has clearly changed the psychology of buyers.
"Buyers are taking their time, and they're negotiating in ways they haven't
before," Lawton said. "Desirable properties are selling for slightly over
asking, with a few offers. It's taking longer for properties to sell, but
they're still selling. From a buyer's perspective, it's a good time. Prices
will come down a little bit because of this time of year and will pick back
up in spring."
Los Angeles Homes Continue Steady Upward Climb
The 2.4 percent increase in the third quarter continued the trend of modest
increases in Los Angeles over the past three years. Luxury home values peaked
in Los Angeles in 1990, and still haven't returned to those previous levels.
However, values have now increased for eight consecutive quarters.
"Everyone is anticipating that the market is going off a cliff like it did
in Silicon Valley, but that's not going to happen here," said Alan Mark,
of Prudential Malibu Realty. "The strength of the entertainment world hasn't
come back the way it normally has, but it hasn't been abandoned either.
We have very qualified buyers who want to know if they can get a deal on
something nice." Mark noted that confidence levels are starting to recover
following the September 11 attacks, but it is still unclear whether the
price increases of the past three years will hold.
"Volume is down," said Michael Deasy, of Mossler, Deasy & Doe, in Beverly
Hills. "But in the past few weeks, the inventory is increasing and the prices
are the same or higher. If that trend continues, that will have an impact
on prices."
Jade Mills, an agent with Coldwell Banker in Beverly Hills, said: "There
have some been very, very high sales that have brought the average up. Prices
between $2 million and $3 million have stayed pretty much the same and may
be down a little. The upper end is still flourishing. We've had a couple
of sales over $15 million."
In Santa Barbara, agent Dan Encell with Prudential California Realty, said
buyers are being more discriminating. "There is still a demand for premier
properties, and there is very little demand for mediocrity. Buyers are being
more selective. It's not like when there was a shortage of inventory and
they had to take it or leave it. They can be patient."
San Diego Records Strongest Gains in State
San Diego's 6.2 percent increase in the third quarter was the largest value
gain of all three markets. Compared to a year ago, values are up 21. 3 percent.
Third quarter values in San Diego also stand at their highest levels since
1992.
Despite the increase, real estate agents said the volume of sales has slowed.
"The prices are going up, but the volume is thin," said Charles Gifford,
an agent with Coldwell Banker covering the San Diego region. "September
11 and the time of year are affecting the market. Now it is taking six to
eight visits over a two- to six-month period. Buyers are shopping and being
more cautious. They're also willing to stay longer in their new home. The
buyers are not as speculative as they have been."
John Cote of The Willis Allen Co. in Rancho Santa Fe is seeing similar behavior.
"The problem we're seeing since September 11 is not a shortage of buyers,
but a shortage of buyers who are ready to make offers. We've seen enormous
interest from qualified people in the high end. We've had four or five escrows
in the past week - a dramatic difference over the past five weeks. That
means buyers are deciding to spend money again."
About the Prestige Home Index
Some common features of the luxury homes in the Index portfolios are: 3,000
- 6,000 square feet, three to six bedrooms, three to six bathrooms. San
Francisco Bay Area portfolio properties include a cross-section of homes
valued at $1 million or more located in the following communities: Alamo,
Atherton, Belvedere, Danville, Healdsburg, Hillsborough, Lafayette, Los
Altos, Los Gatos, Mill Valley, Moraga, Orinda, Palo Alto, Piedmont, Portola
Valley, Ross, St. Helena, San Francisco, Saratoga, Sonoma, Tiburon and Woodside.
Properties in the Los Angeles portfolio represent a cross-section of homes
valued at $1 million, plus in the greater Los Angeles metropolitan area.
Communities included in this portfolio are Arcadia, Beverly Hills, Calabasas,
La Caņada Flintridge, Encino, Los Angeles, Malibu, Marina del Rey, North
Hollywood, Pacific Palisades, Pasadena, Playa del Rey, Santa Monica, Studio
City and the West Los Angeles enclaves of Bel Air, Brentwood and Westwood.
The San Diego Index portfolio represents a cross-section of homes valued
at $750,000 plus in the following communities: Carlsbad, Coronado, Del Mar,
Encinitas, La Jolla, La Mesa, Poway, Rancho Santa Fe, San Diego and Solana
Beach.
The First Republic Prestige Home Index™ is the first statistical model
of its kind customized to measure changes in high-end home values in key
California urban markets. In producing the Index, Case Shiller Weiss draws
upon its economic database and years of experience in tracking single-family
home values; collects and cross-checks data from multiple sources; achieves
a weighted balance of validation elements such as repeat sales, comparable
sales, and physical home characteristics; and combines this with First Republic's
extensive local market knowledge.
First Republic Bank is a publicly traded (NYSE: FRC) commercial bank. The
Bank has total banking assets of $4.2 billion, and other assets under management
and administration of $6.5 billion. The Bank specializes in providing personalized,
relationship-based wealth management services including private banking,
investment management, trust, brokerage, and real estate lending. First
Republic provides its services online and through branch offices in five
major metropolitan areas: San Francisco and Silicon Valley; the Greater
Los Angeles Area; San Diego; Las Vegas; and New York City. More information
is available on the Bank's Web site at www.firstrepublic.com.
Contact: Greg Berardi
Blue Marlin Partners
(415) 566-6277
greg@bluemarlinpartners.com
