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First Republic Bank, August 20, 2012

Prestige Home Index: California Luxury Home Values Rise Third Quarter 2012
First Republic Bank

Prices Climb in San Francisco, Los Angeles and San Diego Year-Over-Year

Luxury home values rose in California’s major metropolitan markets in the second quarter of 2012 compared to a year ago, according to the First Republic Prestige Home Index™ by First Republic Bank, a leading private bank and wealth management company.

In the quarter that ended June 30, 2012, the Index indicated the following:

  • San Francisco Bay Area values climbed 6.6% from the second quarter of 2011 and were up 2.9% from the first quarter of 2012. The average luxury home in San Francisco is now $2.67 million.
  • Los Angeles area values increased 2.4% from the second quarter a year ago and jumped 4.3% from the first quarter of 2012. The average luxury home in Los Angeles is now $2.04 million.
  • San Diego area values gained 2.5% year-over-year and declined 0.2% from the first quarter of 2012. The average luxury home in San Diego is now $1.65 million.

“The luxury home market continued to improve in the second quarter, with some neighborhoods experiencing strong price appreciation and accelerating interest from homebuyers,” said Katherine August-deWilde, President and Chief Operating Officer of First Republic Bank. “During the first half of 2012, buyers were motivated by a lack of supply and very low interest rates.”

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, which has tracked luxury homes since 1985, are accessible at www.firstrepublic.com. First Republic Bank is an active lender in the luxury home market for primary residences and vacation homes.

In the Bay Area, prices appreciated 2.9% in the second quarter due to the strong economy. The 6.6% price increase compared to a year ago was the largest year-over-year gain since the first quarter of 2006.

Jay Costello, President of Hill & Co in San Francisco, said the market was strong. “In San Francisco, 40% of the properties are selling above the asking, 30% are selling at the asking and 30% are selling below. It is now common to have multiple offers in all price ranges in all neighborhoods. We have a hot market right now, and we’re going to see price increases over the next three to five years.”

In Silicon Valley, the market was also strong. “In the second quarter, Palo Alto and Atherton were red hot,” said Ken DeLeon of DeLeon Realty in Palo Alto. “A listing for $5 million would sell in one week over asking. Palo Alto is setting all-times highs. For the first time, people are thinking if they don’t buy soon, the market is going to get away from them. In the third quarter and fourth quarter, prices should stabilize, but I expect the market to pick up after the first of the year.”

In the East Bay, Adam Betta of Highland Partners in Piedmont said many sellers have been underestimating the resale value of their property as prices start to recover. “The market in Berkeley, Piedmont and the Oakland Hills is moving in the right direction. We’ve seen an increase in activity and buyers. Since January, a sense of urgency has come back to the market, particularly among luxury buyers. There were many buyers sitting on the fence who have jumped in.”

In Los Angeles, values posted their largest year-over-year gain since the second quarter of 2011. The 4.3% increase from the first quarter was the largest quarterly gain since the third quarter of 2005.

Real estate agents said a lack of supply created strong competition for properties. “We need inventory,” said Anna Solomon of Prudential California Realty in Brentwood. “Anything from $1.5 million to $3 million is selling. Properties from $900,000 to $1.5 million are in even higher demand. Many won’t sell because they can’t find anything to buy at a slightly higher price. As long as interest rates stay low, demand will stay strong.”

In Beverly Hills, Myra Nourmand of Nourmand & Associates, said there was active demand for the most exclusive properties. “The highest end of the market, over $10 million, is very strong. It’s a combination of pent-up demand, very low interest rates and a lack of product. We’re also seeing a lot of new wealth coming to the market, as well as foreign buyers.”

Lisa Platt of Coldwell Banker in Beverly Hills said buyers appear more ready to purchase a home. “We’ve seen a huge spike in multiple offers due to extremely low inventory and interest rates at all-time lows,” she said. “Buyers are entering the market because they think we may have hit the bottom.”

San Diego luxury homes edged down during the second quarter, but the 2.5% year-over-year increase was the biggest annual gain since the first quarter of 2007.

Chuck Gifford of Coldwell Banker in Rancho Santa Fe said the luxury market remains soft and noted that many sellers are trading down to lower-priced properties. He also said many homeowners can’t sell because they have no equity in their homes after buying at the peak of the market. “I see the housing market gradually declining over the next four years. The real estate market is like a hang glider with no engine to gain altitude,” he said.

In La Jolla, Mo Loghavi of California Prudential Realty also said there was a small supply of homes, but that buyers are eager to make offers. “There is more demand for fewer homes. Properties under $4 million are moving, but over $4 million, it is flat. This year, the amount of inventory is much less than last year.”

About The First Republic Prestige Home Index

The First Republic Prestige Home IndexTM 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 (NYSE:FRC) and its subsidiaries provide private banking, private business banking and private wealth management. Founded in 1985, First Republic specializes in exceptional, relationship-based service offered through preferred banking or wealth management offices primarily in San Francisco, Palo Alto, Los Angeles, Santa Barbara, Newport Beach, San Diego, Portland, Boston, Greenwich and New York City. First Republic offers a complete line of banking products for individuals and businesses, including deposit services, as well as residential, commercial and personal loans. First Republic is a component of the S&P Total Market Index, the Wilshire 5000 Total Market IndexSM, the Russell 1000®, Russell 3000® and Russell Global indices and six Dow Jones indices.

About First Republic Private Wealth Management

First Republic Private Wealth Management is the investment management, trust and brokerage group of First Republic Bank. First Republic Private Wealth Management offers objective advice and fully customized solutions with the same level of exceptional client service that has been the hallmark of First Republic Bank for more than 25 years. First Republic has the flexibility to provide individuals, families, businesses, endowments, schools and non-profit organizations with appropriate choices that responsibly meet a client’s specific investment objectives. Securities Products and Services are offered by First Republic Securities Company, LLC - Member FINRA/SIPC. First Republic Securities Company and First Republic Investment Management are wholly owned subsidiaries of First Republic Bank. Unless otherwise disclosed, investments through First Republic Investment Management and First Republic Securities Company, LLC are not FDIC-insured, not bank guaranteed and may lose value.


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