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California Luxury Home Values Rise Modestly in Third Quarter of 2006
Los Angeles, San Diego and San Francisco Record Small Gains In Cooling Market
November 20, 2006
SAN FRANCISCO – Luxury home values posted slight gains in Los Angeles, San Diego and San Francisco in the third quarter of 2006, according to the First Republic Prestige Home Index™ by First Republic Bank, a leading provider of wealth management and private banking services.
The Index, which has tracked luxury homes since 1985, found:
- Los Angeles values rose 0.6% from the second quarter of 2006 to the third quarter and climbed 4.4% from a year ago. The average luxury home in Los Angeles is now a record $2.37 million.
- San Diego values increased 1.9% from the second quarter of 2006 to the third quarter and gained 5.4% from a year ago. The average luxury home in San Diego is now a record $2.18 million.
- San Francisco Bay Area values increased 1.1% from the second quarter of 2006 to the third quarter and gained 4.0% from a year ago. The average luxury home in San Francisco is now a record $2.96 million.
“Luxury home values posted very modest increases in the third quarter in Los Angeles, San Diego and San Francisco,” said Katherine August-deWilde, Chief Operating Officer of First Republic Bank. “This trend is due to growing inventory, longer sales time, and greater caution among buyers because of the uncertainty in the market.”
First Republic Bank (NYSE: FRC) produces the Prestige Home Index each quarter with Fiserv CSW Inc., a leading provider of automated property valuation services and home price metrics to U.S. financial institutions. Historical results of the Index are accessible at www.firstrepublic.com.
Los Angeles Area Values
In Los Angeles, the market cooled markedly in the third quarter, particularly year-over-year. Values increased just 4.4% from the third quarter of 2005 to the third quarter of 2006 after 14 straight quarters of double-digit, year-over-year gains that dated back to the first quarter of 2003.
In Beverly Hills, buyers are more cautious than they have been in several years. “There is some hesitation in all price ranges,” said Steve Frankel of Coldwell Banker Previews Estate Division in Beverly Hills. “I am still getting lots of showings on properties $10 million and above, but buyers are being sensitive. They're saying, 'I am willing to pay, but I'm not willing to overpay.' Two years ago, they would overpay and wait for the market to catch up.”
In Montecito near Santa Barbara, the number of sales is falling. “There are still legitimate buyers and sellers out there, but it is a difficult market,” said Jeff Farrell of Coldwell Banker Previews International in Montecito. “Prices and inventory in Montecito have stayed about the same. But buyers are more reluctant, and sellers don't want to bite the bullet to put prices where they should be. There are definitely transactions happening, but they are fewer.”
In the beach communities of Orange County, the number of sales is also down significantly, although prices are still stable. “In the coastal market at $3 million and above, homes are still selling fairly well,” said Rob Montgomery of HOM Real Estate in Newport Beach. “Generally speaking, sales volume has been down 30% to 35%, but pricing has gone up as much 8% or 9%.”
San Diego Area Values
In San Diego, luxury home values rose 1.9% from the second quarter of 2006, but year-over-year the increases have been declining for the past six quarters.
In the luxury community of Rancho Santa Fe, sellers are adjusting their expectations. “It's definitely a buyers' market,” said Madeleine Gere of Gere Group Properties in Rancho Santa Fe. “The buyers are there, but they're being very cautious. They're waiting to see how prices will go. When a home is priced right, it's a multiple offer situation. Demand is keeping the market alive here. The whole world wants to be here.”
However, in the coastal communities of La Jolla, Del Mar and northern San Diego County, the market is somewhat strong. “From $2 million to $4 million, the market is hot in Del Mar and La Jolla,” said Janet Lawless Christ of Coldwell Banker Previews in Rancho Santa Fe. “Above $8 million, the market is also hot. Between those price ranges, there is more competition because new inventory is coming onto the market.”
San Francisco Bay Area Values
In the San Francisco Bay Area, luxury homes continued the recent pattern of small quarterly gains. Increases have ranged between 0.3% and 1.8% over the past five quarters. Values have risen modestly for eight quarters.
Despite the slight increase from the second quarter, market conditions varied widely in the region. In San Francisco, prices and sales appear to be falling. “I see price reductions, and homes selling below the asking price,” said Naomi Glass of Coldwell Banker in San Francisco. “Few things are moving. People are hesitant because they see an uncertain market.”
On the San Francisco Peninsula, the market is also trending downward. “In Los Altos Hills, it is a buyers' market,” said Ethel Green of Intero Real Estate in Los Altos. “People are very discerning and slow to make decisions. The home has to be in pristine condition to sell. People who are not getting the prices they want are taking their houses off the market. It's actually a great time to buy.”
In Marin County, the lower tier of the luxury market is doing well. “The market from $2 million to $4 million feels strong,” said Tina McArthur of Pacific Union in Larkspur. “We just had eight offers on a home that went over the asking price. If a house is done nicely, is on flat land and is the quintessential family home, no one is batting an eyelash over these prices.”
About The First Republic Prestige Home Index
The First Republic Prestige Home Index™™ is the first statistical model of its kind customized to measure changes in homes valued at more than $1 million in key California urban markets. Some common features of luxury homes in the Index: 3,000 to 6,000 square feet, three to six bedrooms, and three to six bathrooms. San Francisco Bay Area properties include a cross-section of luxury homes in 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 Los Angeles represent a cross-section of luxury homes in Arcadia, Beverly Hills, Calabasas, La Cañada 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. San Diego properties represent a cross-section of luxury homes in Carlsbad, Coronado, Del Mar, Encinitas, La Jolla, La Mesa, Poway, Rancho Santa Fe, San Diego and Solana Beach. In producing the Index, Fiserv CSW Inc. 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.
About First Republic Bank
First Republic Bank is a NYSE-traded, private bank and wealth management firm. The Bank and its subsidiaries specialize in providing personalized, relationship-based services, including private banking, private business banking, investment management, trust, brokerage and real estate lending. As of September 30, 2006, the Bank and its subsidiaries had total Bank assets and other managed assets of $31.8 billion. First Republic Bank provides access to its services online and through preferred banking or trust offices in ten major metropolitan areas: San Francisco, Los Angeles, Santa Barbara, Newport Beach, San Diego, Las Vegas, Portland, Seattle, Boston and New York City. More information is available on the Bank's website at www.firstrepublic.com.
Contact:
- Greg Berardi
- Blue Marlin Partners
- (415) 239-7826
- greg@bluemarlinpartners.com
