California Luxury Homes Holding Their Value

SAN FRANCISCO – Luxury home prices declined modestly in Los Angeles and San Francisco in the fourth quarter but rose year-over-year, while San Diego values posted small decreases in the fourth quarter compared to a year ago, according to the First Republic Prestige Home Index™ by First Republic Bank, a leading provider of private banking, private business banking and wealth management services.

In the quarter ended Dec. 31, 2007, the Index indicated the following:

• Los Angeles area values declined 1.2% from the third quarter of 2007 and rose 2.0% from the fourth quarter of 2006. The average luxury home in Los Angeles is now $2.4 million.
• San Diego area values fell 1.4% from the third quarter of 2007 and dropped 1.9% from the fourth quarter of 2006. The average luxury home in San Diego is $2.11 million.
• San Francisco Bay Area values decreased 1.7% from the third quarter of 2007 and were up 3.7% from the fourth quarter of 2006. The average luxury home in San Francisco is $3.03 million.

"Luxury home prices in California weakened in the fourth quarter, but they are holding their own on a year-over-year basis," said Katherine August-deWilde, President and Chief Operating Officer of First Republic Bank. "At the high end of the luxury market, demand remains quite strong, while buyers at the lower end are being more selective. Overall, prices in Los Angeles, San Francisco and San Diego have remained firm due to a lack of inventory and the desirability of luxury neighborhoods."

First Republic Bank 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. The Index has tracked luxury homes since 1985.

Los Angeles Area Values

Values in the Los Angeles area are down from a high of $2.46 million in the second quarter of 2007. The 1.2% decline in the fourth quarter of 2007 was the region's second consecutive quarterly drop. In December 2006, the average value of a luxury home in the Los Angeles area was $2.35 million.

On the West Side, the higher end of the luxury market remained strong. In 2007, the number of home sales over $5 million totaled 261, up from 211 in 2006, according to Joyce Flaherty of Coldwell Banker in the Beverly Hills South office. Sales in 2008 are already running ahead of last year's pace. "People who have a tremendous amount of money don't care about the market, and they're buying," Flaherty said. "As long as it is fairly priced, properties are selling. A $22 million property recently sold within a week."

Anita Rich of Keller Williams in Sherman Oaks said that the lower end of the luxury market is holding up much better than it was two months ago. "People have realized that the bottom isn't going to fall out," Rich said. "More people are now focused on buying. I'm seeing more stability in the market, and I see attitudes improving among buyers and sellers."

In Orange County, the market is also active, although inventory levels are modestly higher. "We continue to see strength in the high end of the market," said Cari Young of HOM Real Estate Group in Newport Beach. "We've seen some of the largest sales ever, both this year and at the end of last year. We just haven't seen a significant drop in prices in the coastal areas and more desirable communities."

San Diego Area Values

Values in the San Diego area are down from a high of $2.19 million in the second quarter of 2007. The 1.4% drop in the fourth quarter was the region's second consecutive quarterly decline. In December 2006, the average luxury home was $2.15 million.

Despite the declines, some agents said the market has not fallen substantially. "We're not seeing wholesale price reductions," said Lucy Kelts, Prudential California Realty in Rancho Santa Fe. "If something is listed fairly, there is room to negotiate and make good deals. Inventory is also shrinking and builders are not breaking ground on any new projects. When the inventory levels out, buyers who have been waiting may not find a lot to choose from."

In northern San Diego County, the market has slowed somewhat, but interest in beach properties remains high. "There are a lot of buyers with the means of buying second homes, and they want real estate close to the ocean," said Wendy Ramp of Prudential California Realty in Del Mar. "Homeowners can walk to everything they want in Del Mar – restaurants, beach and shopping. That's why it remains so attractive."

San Francisco Bay Area Values

In the San Francisco Bay Area, values decreased 1.7%, the first quarterly decline since the fourth quarter of 2006, when average luxury values were $2.92 million. The region's luxury values surpassed the $3 million mark for the first time in the second quarter of 2007. However, inventories are low for high-end properties in the City and parts of Marin and the Peninsula, where values remain strong.

Agents said demand for luxury homes remains high in San Francisco, even though values have softened in areas outside of the City. "The market is just very strong," said Richard Weil of Hill & Co. in San Francisco. "We don't have any inventory. It comes down to that." Weil said homes between $3 million and $5 million are taking a little longer to sell, but demands for properties above $6 million have been largely unaffected by the downturn affecting the rest of the housing market.

On the Peninsula, the luxury market remains strong in some high-end communities. "In the past few weeks, we've had some phenomenal sales in Atherton and some very large sales in Woodside," said Sue Crawford of Coldwell Banker in Menlo Park. "People with money aren't as impacted by what's happening with interest rates."

In Marin County, the upper tier is stronger than the lower end of the luxury market. "The volume of sales has slowed somewhat in the past three months," said Tracy McLaughlin of Morgan Lane Real Estate in Ross. "Wall Street's undulations have made the luxury market a little more tenuous."

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 Canada 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 private bank and wealth management company offering personal banking, business banking, trust, brokerage and wealth management services. The Bank specializes in delivering personalized relationship-based service 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. First Republic offers wealth management services through First Republic Wealth Advisors and First Republic Investment Management. Brokerage services are provided through First Republic Securities Company LLC, and trust services are provided through First Republic Trust Company. More information is available on the Bank's website at www.firstrepublic.com. First Republic is a division of Merrill Lynch Bank & Trust Co., FSB.

Contact:
Greg Berardi
Blue Marlin Partners
(415) 239-7826
E-mail Greg Berardi