Luxury Home Values Rose in San Francisco and Los Angeles

First Republic Bank, February 19, 2013

Prices Post Strong Year-Over-Year Gains; San Diego Values Were Flat

Luxury home values increased in San Francisco and Los Angeles, and remain largely unchanged in San Diego in the fourth 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 Dec. 31, 2012, the Index indicated the following:

  • San Francisco Bay Area values rose 8.4% from the fourth quarter of 2011. The average luxury home in San Francisco is $2.73 million.
  • Los Angeles area values rose 4.4% from the fourth quarter a year ago. The average luxury home in Los Angeles is $2.06 million.
  • San Diego area values decreased 1.4% year-over-year. The average luxury home in San Diego is $1.64 million.

“Luxury home prices rose strongly in the San Francisco Bay Area and Los Angeles this past year,” said Katherine August-deWilde, President and Chief Operating Officer of First Republic Bank. “Growing demand from buyers, low mortgage rates and a lack of inventory continued to put upward pressure on values. Multiple offers are common in many high-end neighborhoods as buyers compete for a small number of attractive properties.”

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.

Bay Area posted its fourth consecutive quarter of healthy gains on a year-over-year basis.

In San Francisco, Mary Lou Castellanos of Sotheby’s International Realty said buyers had limited choices in the fourth quarter.  “There is no inventory on the market, particularly for homes priced between $3 million and $5 million. A lot of money is pouring in from Asia and Silicon Valley. Prices are back to where they were at the beginning of 2008.”

In Silicon Valley, prices were at levels not seen since before the financial crisis.  “We saw huge moves at the end of 2012,” said Mike Dreyfus of Dreyfus Properties in Palo Alto. “We saw local neighborhoods up as much as 20% year-over-year, and it’s continuing into this year. Inventory is zero. Multiple offers are common. There has been a run on high-end homes and land. We have blown past the highs of 2008.”

In Marin County, the market was continuing to strengthen. “Growing demand is driving the market,” said Brad Garsten of Frank Howard Allen in Greenbrae.  “We are starting to see some multiple offers, although that is the exception. Buyers remain picky, and sellers are demanding a good price. Inventory remains low.”

In Los Angeles, year-over-year values posted their largest increase since the second quarter of 2007.

Jane Brill Gavens of Coldwell Banker Beverly Hills South said the market is very active. “Every listing I put out has multiple offers. Every listing I make an offer on has multiple offers. Low inventory and pent-up demand, combined with low interest rates, high liquidity and foreign buyers, have created a perfect storm for a sellers’ market.”

In Pasadena, Maureen Hollingsworth of Sotheby’s International Realty said the market was strong. “Last quarter there was little inventory, and very good homes went for very high prices. More inventory is now coming onto the market, and prices are approaching close to where they were at the peak. Our market never went down very much.”

In Manhattan Beach, Barry Host of South Bay Brokers said the scarcity of inventory was driving prices.  “We have one of the lowest levels of inventory that I’ve seen. More buyers are in the market, and that is putting pressure on home prices. We’ve had a number of multiple offers recently.  We are also seeing many all-cash offers.”

San Diego luxury homes were down slightly in the fourth quarter and year-over-year. Agents attributed the decrease to the seasonal holiday slowdown, but said buyer interest was picking up.

“Our clients think now is the time to buy,” said Peggy Chodorow of Prudential California Realty in La Jolla.  “They believe the market bottomed out a year ago. Interest rates are good, and many say it’s time to get in. In particular, the high end of the market is starting to move.”

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

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, Palm Beach 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.