Wednesday, June 13, 2007

High End Of Luxury Markets Remains Strong

Southern California Luxury Home Values Rise, San Francisco Bay Area Values Unchanged
High End Of Luxury Markets Remains Strong

May 21, 2007

SAN FRANCISCO – Los Angeles luxury home values climbed 6.5% in the first quarter of 2007 compared to a year ago, while San Diego values rose 3.2% and San Francisco values were virtually unchanged, according to the First Republic Prestige Home Index™ by First Republic Bank, a leading provider of wealth management and private banking services.

The Index, which has tracked luxury homes since 1985, found:

Los Angeles values rose 3.6% from the fourth quarter of 2006 and 6.5% from the first quarter of 2007 compared to a year ago. The average luxury home in Los Angeles is now $2.44 million.
San Diego values increased 0.8% from the fourth quarter of 2006 and 3.2% from the first quarter of 2007 compared to a year ago. The average luxury home in San Diego is now $2.17 million.
San Francisco Bay Area values were unchanged from the fourth quarter of 2006 and were virtually flat in the first quarter of 2007 compared to a year ago. The average luxury home in San Francisco remained at $2.92 million.
"Values in the upper tier of the luxury market are particularly strong," said Katherine August-deWilde, Chief Operating Officer of First Republic Bank. "Luxury home values in Los Angeles remain the strongest of our California markets because of strength in the entertainment industry and the diversified economy. The luxury markets in San Diego and San Francisco are also doing very well."

First Republic Bank (NYSE: FRC) 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 are accessible at

Los Angeles Area Values
Los Angeles luxury values rebounded 3.6% in the first quarter of 2007 after dipping 0.8% in the fourth quarter of 2006. Real estate agents said that a limited supply of marquee properties in exclusive neighborhoods was responsible for the 6.5% increase in the first quarter compared to a year ago.

Steve Frankel of Coldwell Banker in Beverly Hills said the market above $10 million remains very strong. The lower end of the market is also active, although buyers are being more selective. "The very high end continues to have a real head of steam. Good properties in premier locations are getting top dollar, and there are lots of buyers in the market. Homes from $2 million to $3 million are sitting on the market longer, but still at healthy prices. They're just not flying out the door like they were in recent years."

Whit Prouty of Prudential California Realty in Sherman Oaks agreed. "Los Angeles is not the same as the rest of the country. At this point, we seem to be insulated from what's happening elsewhere." Prouty said the region's vibrant economy has resulted in increasing demand and prices for luxury homes, although the market is more well-balanced than it has been. "Neither buyers nor sellers have the upper hand," he noted.

Like Los Angeles, Orange County's market for homes above $10 million is also robust, with inventories rising for homes selling for $2 million to $4 million. "The high end of the market in Newport Beach and Laguna Beach is very strong," said Jim Turco of Surterre Properties in Newport Beach. "In the $2 million to $4 million range, buyers are being very discreet. It's really become a much more normal market in that price range. No one is dominating either side of the transaction."

San Diego Area Values
In the San Diego area, values turned up modestly in the first quarter after declining 1.3% in the fourth quarter of 2006. Year over year, prices increased 3.2% and have averaged single-digit, year-over-year increases for the past five quarters.

"Overall, the market in the high end has been very strong," said Benny Landman of Coldwell Banker in Del Mar. "Since January, there have been multiple offers on many homes. Homes are selling right near or at the asking price. There are a lot of buyers with a lot of cash, although it is taking a little longer to sell."

Polly Rogers of Prudential California Realty in Rancho Santa Fe said inventory is higher in the $3 million to $6 million range, but the market is still moving. "It's a darn healthy market," Rogers said. "People are moving here from within and outside of California, and it's not just one demographic that wants to live here. There isn't much inventory of coastal properties and that's what will hold values."

San Francisco Bay Area Values
In the San Francisco Bay Area, there was no change in values from the fourth quarter of 2006 and values were virtually unchanged from the first quarter a year ago. Agents said luxury home values in the city of San Francisco, along the Peninsula and in Marin County were increasing. There appears to be pent-up demand in these markets, reflected by brisk sales activity for luxury homes in San Francisco and the fact that the median-priced home in Marin County topped $1 million in April for the first time.

"In the $3 million to $5 million range in prime neighborhoods in San Francisco, there is a real shortage of good inventory," said Steve Gothelf of Pacific Union in San Francisco. "When quality properties pop up and are priced correctly, they fly off the shelf. The reason is that we have an abundance of extremely well-qualified people chasing very few properties. That ratchets up prices."

On the Peninsula, the market is also very active. "A majority of the deals are generating multiple offers," said Hugh Cornish of Coldwell Banker in Menlo Park. "We have a strong national and local economy and very little supply of luxury properties. We had half the inventory we normally have in the first quarter."

In the East Bay community of Lafayette, buyers are clearly being more discriminating. "If something is unique, shows well and is priced right, the property is selling," said Kim Strand of Better Homes Realty of Lafayette. "In high demand areas with good schools and a history of appreciation, it's really a normal market. However, in the recent past, you'd have multiple offers. We don't see that very often. The time to sell is now 30 to 45 days, not a week to 10 days."

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 Canada 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 is a NYSE-traded, private bank and wealth management firm. The Bank and its subsidiaries specialize in providing personalized, relationship-based services, including private banking, private business banking, investment management, trust, brokerage and real estate lending. As of March 31, 2007, the Bank and its subsidiaries had total Bank assets and other managed assets of $34.1 billion. First Republic Bank provides access to its services online and through preferred banking or trust offices in ten major metropolitan areas: San Francisco, Los Angeles, Santa Barbara, Newport Beach, San Diego, Las Vegas, Portland, Seattle, Boston and New York City. More information is available on the Bank's website at

Greg Berardi
Blue Marlin Partners
(415) 239-7826
E-mail Greg Berardi

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