Luxury Home Values Rise in the Third Quarter

First Republic Bank, November 20, 2013

San Francisco, Los Angeles and San Diego All Experience Strong Year-Over-Year Gains

Luxury home values increased in San Francisco, Los Angeles and San Diego in the third quarter of 2013 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 third quarter of 2013, the Index indicated the following:

  • San Francisco Bay Area values climbed 10.4% from the third quarter of 2012 and 1.9% from the second quarter of 2013. The average luxury home in San Francisco is $3.0 million.
  • Los Angeles area values rose 14.0% from the third quarter a year ago and 6.7% from the second quarter of 2013. The average luxury home in Los Angeles is $2.3 million.
  • San Diego area values gained 13.5% year-over-year and 6.0% from the second quarter of 2013. The average luxury home in San Diego is almost $1.9 million.

“Luxury home prices were strong both year-over-year and for the third quarter in San Francisco, Los Angeles and San Diego,” said Katherine August-deWilde, President and Chief Operating Officer of First Republic Bank. “Luxury communities in California’s urban coastal areas continue to experience limited inventory and strong demand from U.S. and foreign buyers.”

First Republic Bank produces the Prestige Home Index each quarter with Core-Logic Case-Shiller, 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.

View San Francisco Bay Area Values

The double-digit, year-over-year gain in the region pushed luxury home prices over $3 million in the third quarter. Prices were last at that level in the first quarter of 2008.

“I’m seeing more investment in luxury homes than any time in my career,” said Steve Mavromihalis of Pacific Union in San Francisco. “Very specifically, it’s driven by location and amenities. Except for an unforeseen event, the real estate market for the best homes in San Francisco may experience a real run up because there is very little inventory. Compared to other world-class cities, San Francisco is still a relative bargain.”

In Silicon Valley, the luxury market was at all-time highs. “Demand continues to be very strong, and our inventory is still lagging,” said Anne King of Keller Williams Realty in Palo Alto. “This year, the percentage of all-cash buyers and foreign buyers surpassed last year’s. In Menlo Park and Palo Alto, the median price of a home is over $2.1 million. That says something about this market.”

In the Wine Country, prices continued to rise. “The luxury market in the Napa Valley is good and steady,” said Jim Perry of Pacific Union in St. Helena. “The Wine Country is a little different than the Bay Area because it is mostly second homes. The inventory here has been steadily bought down. If you have the right product, it will still sell quickly.”

View Los Angeles Area Values

In the third quarter, values on a year-over-year basis increased for the sixth straight quarter and are the highest since the fourth quarter of 2008.

On the West Side of Los Angeles, values were very strong. “The high end of the market was off the charts in the third quarter,” said Myra Nourmand of Nourmand & Associates in Beverly Hills. “There is money coming from outside the country – Europe, Asia and Australia. What’s amazing is that the entry-level home in the flats of Beverly Hills is now $4.5 million. That’s the highest ever. The market has come back way beyond 2006.”

In Brentwood, buyer interest remained high. “The market is not quite as frothy as it was in the spring and early summer, but it remains very strong,” said David Offer of Berkshire Hathaway HomeServices in Brentwood. “The pace of appreciation has slowed a bit. There is still limited inventory, but the buyers aren’t feeling the same sense of urgency as they were earlier in the year. They are not as fearful of prices getting away from them.”

In the Santa Barbara area, prices continued their upward trend. “Prices started climbing in the beginning of the year, and we’ve continued to see a steady rise in values,” said Dina Landi of Village Properties Realtors in Montecito. “Sales slowed a bit through the fall, but just recently picked up again. Some of the inventory that has been on the market has been scooped up.”

View San Diego Area Values

With the 13.5% increase year-over-year, luxury home values were the highest since the fourth quarter of 2008.

“Our market came back in the third quarter,” said Chuck Gifford of Coldwell Banker in Rancho Santa Fe. “Inventory was very low, which helped prices. We also saw offers that were closer to sellers’ expectations.”

On Coronado Island, the summer buying season was strong. “We had great demand this summer,” said Scott Aurich of Pacific Sotheby’s International Realty on Coronado. “High-end properties that had been on the market for a while had multiple offers. There is an increased level of activity in the high-end market, which is very positive.”

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, Core-Logic Case-Shiller 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) is a full-service bank specializing in private banking and private business banking.  The Bank’s wealth management affiliates offer trust, investment consulting and advisory services. 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.

Media Contact:

Greg Berardi
Blue Marlin Partners
(415) 239-7826