Luxury Home Value Stable in Fourth Quarter of 2011

First Republic Bank, February 22, 2012

Los Angeles, San Francisco Post Small Decreases; San Diego Values Rise Modestly

Luxury home values declined slightly in Los Angeles and San Francisco, but rose in San Diego in the fourth quarter of 2011 compared to the third quarter, according to the First Republic Prestige Home IndexTM by First Republic Bank, a leading private bank and wealth management company.

In the quarter ended Dec. 31, 2011, the Index indicated the following:

  • Los Angeles area values declined 1.8% from the third quarter of 2011 and dipped 0.1% from the fourth quarter a year ago. The average luxury home in Los Angeles is now $1.97 million.
  • San Diego area values rose 1.1% from the third quarter but dropped 3.7% year-over-year. The average luxury home in San Diego is now $1.64 million.
  • San Francisco Bay Area values fell 0.3% from the third quarter and were down 3.1% from a year ago. The average luxury home in San Francisco is now $2.52 million.

“Luxury home prices in urban, costal markets in California were mostly stable in the fourth quarter,” said Katherine August-deWilde, President and Chief Operating Officer of First Republic Bank. “Low rates, good values and positive economic news have led to increasing interest in home buying in 2012. San Francisco and Silicon Valley, in particular, are likely to benefit from the strength of the technology and social media sectors.”

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 primary residences and vacation homes.

In Los Angeles, values have remained in a narrow range over the past two years. In the first quarter of 2010, the average price of a luxury home in Los Angeles was $1.98 million. In the fourth quarter of 2011, it was $1.97 million.

Agents said buyer activity rose toward the close of the fourth quarter. “The end of the fourth quarter closed very strong,” said Mary Beth Woods of Coldwell Banker in Brentwood. “The problem is that we don’t have as much inventory as we need. Buyers are hunting for properties. If the home is priced close to recent comps, it will sell.”

Rory Posin of RE/MAX in Beverly Hills said the market has clearly picked up. “I don’t think I could be any busier. Pricing is flat, but activity is strong.”

In Santa Barbara County, the market appears to be firming. “The high-end market in Montecito was slow the last couple of years, but it heated up at the end of 2011,” said Rebecca Riskin of Village Properties in Montecito. “Since January, we have seen multiple closings for over $9 million, as well as several homes above $15 million enter escrow. Buyers remain price conscious, but there is a greater level of confidence in the market.”

San Diego values posted a second consecutive quarterly gain, but prices were still down 3.7% year-over-year.

“Most of the high-end sales in the fourth quarter were on the oceanfront,” said Andy Nelson, President and CEO of Willis Allen Real Estate. “In the first quarter, we have seen new buyers looking for properties. That’s a good sign. We also have reduced inventory and that could help push prices. If prices start improving, we may see sellers re-enter the market.”

In La Jolla, activity has increased markedly since the beginning of the year. “The fourth quarter was slow, and we were worried it would carry over into the New Year,” said Peggy Chodorow of Prudential California Realty in La Jolla. “Since the beginning of the year, the market has changed. People are buying houses, and the number of showings has skyrocketed. We’ve even had some multiple offers. This is going on across every price range.”

In the Bay Area, Silicon Valley and San Francisco were the most robust markets for luxury homes.

“You are starting to see the positive impact of social media IPOs, hedge fund wealth, and interest from foreign buyers,” said David Barrett of Warwick Properties Group in San Francisco. “The market is benefitting from good old-fashioned consumer confidence. We recently had 100 people at a showing.”

In Silicon Valley, the market was strong. “In the fourth quarter, especially in the last two months, the market really picked up,” said Monica Corman of Alain Pinel in Menlo Park. “Just about everything was selling. Palo Alto has been strong, and it has spread to other communities. There’s incredibly low inventory and pent-up demand. Silicon Valley also has experienced job growth and IPOs. All of this is driving the market.”

In Marin County, prices were stable. “The market is largely flat and will remain flat for the next two to three years, with only modest increases likely,” said Brad Garsten of Frank Allen Howard Realtors in Greenbrae. “We’re going to continue to teeter along the bottom until the economy comes back nationally and globally.”

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.