Luxury Home Prices Stabilize In First Quarter 2010

First Republic Bank, May 28, 2010

Values Rose Slightly in San Francisco, San Diego; Decline Slows In Los Angeles

Luxury home values in Los Angeles, San Diego and San Francisco improved slightly in the first quarter of 2010, according to the First Republic Prestige Home Index™ by First Republic Bank, a leading provider of private banking and wealth management services.

In the quarter ended March 31, 2010, the Index indicated the following:

  • Los Angeles area values declined 8.9% over the past year and decreased 1.8% from the fourth quarter of 2009. The average luxury home in Los Angeles is now $1.98 million.
  • San Diego area values slid 3.8% year-over-year and rose 1.2% from the fourth quarter of 2009.  The average luxury home in San Diego is now $1.72 million.
  • San Francisco Bay Area values fell 6.1% over the past year but climbed 1.1% from the fourth quarter of 2009.  The average luxury home in San Francisco is now $2.54 million.

"Luxury home values in San Diego and San Francisco improved slightly in the first quarter, while values stabilized in Los Angeles," said Katherine August-deWilde, President and Chief Operating Officer of First Republic Bank.  "Compared to lower priced properties, luxury home prices did not fall as far in the housing downturn, and the recovery has been more modest.  Prices have risen faster in the broader market because the discounts were deeper, but real estate professionals say stabilizing values in the luxury market have resulted in significant market activity.  Recent stock market volatility and uncertainty in Europe could impact activity in coming months, but very low interest rates will continue to have a positive impact."

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  First Republic Bank is an active lender in the luxury home market for both primary residences and vacation homes.

Values in Los Angeles appeared to stabilize. The rate of decline slowed from the first quarter of 2010 compared to the first quarter of 2009.

"Sales have returned to the high end market unlike most of last year," said David Offer of Prudential California Realty in Brentwood.  "But it is still a challenging market.  It is not enough to be a great house in a great location. The property also has to be a great value.  Many sellers still aren't prepared to put their homes on the market at prices that are going to compel buyers on a value basis."

In the San Fernando Valley, the luxury end of the market has become more active.  "We have seen a lot more listings and more activity in general," said Whit Prouty of Keller Williams Realty in Studio City.  "It feels like we have bottomed out and the market has stabilized.  But we aren't going to see any great rebounds. We're likely to see moderate growth in the future, more along the lines of inflation."

Values in San Diego posted their second straight quarterly increase.

In Rancho Santa Fe, the market is on the upswing, although it remains slower in La Jolla.  "We're starting to see people spend over $3 million, particularly in Rancho Santa Fe," said Michael Taylor of Prudential California Realty in Rancho Santa Fe.  "In La Jolla, which didn't fall as far as Rancho Santa Fe, the market appears to be slowing.  In Rancho Santa Fe, it is accelerating.  The consumer no longer is fearful that the bottom is falling out of the market."

In north San Diego County, buyers have returned to the market.  "People who have been sitting on the sidelines are now moving," said Scott Billington of Coastal San Diego Homes in Solana Beach.  "There's an optimism that maybe we've gone through the worst and that now may be the time to jump in before interest rates go up."

Values in the San Francisco Bay Area increased on a quarterly basis for the first time in seven quarters.

Unlike most of 2009, luxury properties in San Francisco are selling again.  "One property in San Francisco just sold for more than $10 million," said Tom Biss of Sotheby's International in San Francisco. "We haven't seen those prices in at least a couple of years.  There have always been buyers, but they just weren't comfortable making offers because they didn't know where the market was going.  The rising stock market is having a positive impact."

In Palo Alto, the market was also picking up.  "Sales have improved dramatically, and we're actually seeing some multiple offers," said Anne King of Keller Williams Realty in Palo Alto.  "Buyers have more confidence in the marketplace right now.  Companies in the area say they are hiring, and buyers have more assurance that the market has bottomed.  I don't think we're going to see dramatic price increases, but the market is going to continue to get stronger, barring some catastrophe."

In Marin County, the market also showed encouraging signs.  "The combination of better consumer expectations, a rising stock market and liquidity in the lower end of the market have all led to higher demand," said Dave DuPont of Decker Bullock Sotheby's International Realty in Mill Valley.  "However, the strength of the upper end of the real estate market will continue to depend on the strength of the stock market."

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

Founded in 1985, First Republic Bank and its affiliated companies provide private banking, private business banking and private wealth management, including investment, trust and brokerage services. First Republic specializes in delivering exceptional, relationship-based service through preferred banking and/or wealth management offices in 10 metropolitan areas: San Francisco, Los Angeles, Santa Barbara, Newport Beach, San Diego, Portland, Seattle, Boston, Greenwich and New York City. More information is available on the Bank’s website at First Republic is a division of Bank of America, N.A.