Luxury Home Values Rise Slightly in Fourth Quarter

First Republic Bank, February 28, 2011

Price Increase Modestly in Los Angeles, San Diego and San Francisco.

Luxury home values increased in Los Angeles, San Diego and San Francisco in the fourth quarter of 2010 compared to the third quarter, 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 December 31, 2010, the Index indicated the following:

  • Los Angeles area values rose 0.6% from the third quarter of 2010 and declined 2.2% from a year ago. The average luxury home in Los Angeles is now $1.97 million.
  • San Diego area values gained 0.8% from the third quarter of 2010 and increased 0.6% year-over-year. The average luxury home in San Diego is now $1.71 million.
  • San Francisco Bay Area values climbed 1.5% from the third quarter and were up 3.6% from a year ago. The average luxury home in San Francisco is now $2.6 million.

“The fourth quarter of 2010 marked the first time since the second quarter of 2007 that luxury values rose in all three of California’s major metropolitan centers,” said Katherine August-deWilde, President and Chief Operating Officer of First Republic Bank. “The modest increase in the fourth quarter of 2010 was due to low interest rates, a rising stock market and improving consumer confidence.”

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.

Luxury home prices in Los Angeles rose for the first time since the second quarter of 2008.

In Beverly Hills, there are a growing number of buyers, but a limited number of luxury homes for sale. “There is a huge amount of pent-up demand and a very tight market,” said Billy Rose of Prudential California Realty in Beverly Hills. “Financially savvy buyers are really looking to buy, but they are constrained by a lack of inventory. Buyers are likely to look back in early 2010 as the bottom, and we’re likely to start seeing appreciation, barring any unusual events.”

In luxury beach communities, buyer interest was growing. “December ended on a high note, and right now the market in Malibu and Pacific Palisades looks strong,” said Carolyn Johnson of Prudential California Realty in Pacific Palisades. “Sellers are pricing their houses reasonably. Cash buyers are snapping up really good properties at really good prices.”

In Santa Barbara, the luxury market was also picking up. “Properties that are well priced are selling fast and closer to asking price,” Joanne Schoenfeld of Santa Barbara Living Real Estate Brokerage. We’re getting more realism on the part of sellers.”

Values in San Diego rose for the first time since the fourth quarter of 2009.

Ann Brizolis of Prudential California Realty in Rancho Santa Fe said the luxury market is becoming more active. “We had a very robust first quarter thus far. The number of sales has increased, and prices are stable. Since January 1, we have had three closings of $4 million to $6 million. Buyers are realizing that the biggest drop has already happened and there is also good inventory.”

However, Chuck Gifford of Prudential California Realty in Rancho Santa Fe said he expects values to continue to soften in luxury communities across the region, even though the market for all cash transactions is heating up. “The pedal is to the metal in San Diego for all-cash buyers. There are buys you just can’t resist.”

Values in the San Francisco Bay Area posted their third increase in the past four consecutive quarters, although the gains were very modest.

“We’re off to a good start in 2011,” said David Shepardson of Coldwell Banker in San Francisco. “It is shaping up to be a pretty strong year because of low inventory and the fact there are quite a few buyers out there. It’s also apparent very quickly that if the property is overpriced, it will sit there.”

On the Peninsula south of San Francisco, the fourth quarter was unexpectedly strong. “In the past two years, we only had two sales over $6 million in Woodside and Portola Valley,” said Wendy McPherson of Coldwell Banker in Woodside. “In the fourth quarter of last year, we had six sales over $6 million all the way up to $15 million. All of sudden people have their confidence back.”

In the Marin County, the market was also brightening. “This is the year we’re going to see a very good recovery,” said Olivia Decker of Decker Bullock Sotheby’s International Realty in Mill Valley. “We had three months of good sales from December through February. This is encouraging because it is winter, and we’re not even in the spring buying season yet. The market is definitely much better.”

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 crosssection 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. More information is available on the Bank’s website at

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