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Luxury Homes Values in California Soar in First Quarter of 2004
Los Angeles, San Diego Values Set Record Highs; San Francisco Values Climb To Highest Levels Since 2001
May 26, 2004
SAN FRANCISCO – Luxury home values climbed dramatically in Los Angeles and San Diego and approached record levels in San Francisco in the first quarter of 2004, according to the Prestige Home Index™ by First Republic Bank, one of California’s leading providers of full-service banking, investment management, and trust services.
The Index, which has tracked luxury homes since 1985, found:
San Francisco Bay Area values rose 8.3 percent in the first quarter of 2004 compared to a year ago, and 5.8 percent from the fourth quarter of 2003. Average values reached $2.37 million, just short of the record high set in the second quarter of 2001.
Los Angeles values jumped 17.9 percent compared to the first quarter of 2003 and 7.3 percent from the fourth quarter of 2003. Average luxury home values in Los Angeles climbed to $1.66 million, surpassing the previous record set in 1990.
San Diego values were up 15.1 percent compared to the first quarter of 2003 and gained 3.5 percent from the fourth quarter of 2003. San Diego values increased to $1.64 million, the fourth consecutive quarterly record.
“Luxury home values in California rose sharply in the first quarter of 2004 due to strong demand, limited inventory, an improving economy and concern that interest rates, which are still low by historic standards, will continue to rise,” said Katherine August-deWilde, Chief Operating Officer of First Republic Bank. “All three urban California markets are very strong.”
First Republic Bank (NYSE: FRC) produces the Prestige Home Index each quarter with Case Shiller Weiss, 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 www.firstrepublic.com.
Los Angeles Values
In the Los Angeles area, luxury home values posted their fifth consecutive quarter of double-digit gains, with average values rising $252,000 compared to a year ago.
“People are asking prices and the normal reaction is to laugh, but buyers are accepting these prices,” said Alan Mark, of Alan and Tony Mark Prudential Malibu Realty. “The biggest difference now is that there is so much less inventory.” Mark said Los Angeles still remains affordable compared to other big cities.
He also noted that almost every offer is compelling. Mark said that one buyer offered one-third over the asking price on a multi-million dollar property. “It’s a scarcity of inventory and a deep well of buyers. This is just constant, steady, solid gains.”
In Orange County, the market is also robust. “Obviously, the market is on fire,” said Cammy Leslie of Strada Properties in Newport Beach. “I have multiple offers on all of my properties. The inventory is just not what we need.”
Leslie said that some homebuyers have been motivated to purchase properties because they fear rising interest rates will limit their options. “People are buying now because they think interest rates are going up,” she said.
In Santa Barbara, the market also remains strong, although not at the same level as in Los Angeles and Orange County. “Between $1 million and $2.5 million, the market is pretty strong,” said Dan Encell of Prudential California Realty in Montecito. “The estate market above $2.5 million is still absorbing inventory, but it is starting to get strong. As inventory is absorbed, the prices will start to creep upward.”
Encell said that as the economy improves and interest rates rise, the higher end of the luxury market will likely experience the greatest gains, while homes valued between $1 million and $2.5 million may soften somewhat. “The fact that rates have gone up will have a much greater effect on the lower end of the luxury market, but in the higher end, it will probably help,” he said.
San Diego Area Values
San Diego values rose $215,000 compared to the first quarter of 2003 and are up more than $565,000 over the past four years. Agents said the lower end of the luxury market accounted for the largest gains.
“We don’t have the crazy market that Los Angeles has, but good homes that are priced well don’t last,” said Ann Brizolis of Coldwell Banker in Rancho Santa Fe. The market between $1 million and $3 million is quite strong and is being fueled by interest-sensitive buyers seeing to purchase homes before rates go much higher.
Bryan Yarbor of Prudential California Realty in Del Mar agreed. “Anything above $1 million and below $2 million is moving quickly, but there are an abundance of homes above $3 million. At the lower end of the luxury market, homes are staying on the market for only 30 days, which is short by historical standards.
Steve Leggitt, of The Sterling Real Estate Company in Rancho Santa Fe, said the key issue in the lower end of the luxury market is a lack of inventory. “At this point, there is nothing really for sale. It’s a seller’s market. There is very little product and plenty of buyers.”
San Francisco Bay Area
In the San Francisco area, values recorded their largest quarterly increase in almost three years. Average values were $2.37 million in the first quarter, slightly below the record set in the second quarter of 2001, when values stood at $2.39 million.
“It’s like 2001,” said Pattie Lawton of Calegari and Associates in San Francisco. “It’s crazy. We are seeing multiple offers, and we’re seeing homes sell for prices over the asking on certain properties. This is on properties that are well priced, in a good location and are in good condition.”
David Papale of Ritchie-Hallinan in San Francisco agreed that the market is heating up. “The market changed dramatically, almost overnight, in late January,” he said. “In February, March and April, there was a significant amount of competition to buy new listings. Multiple offers were more common, as opposed to last November and December.”
With an upcoming presidential election in November and rising rates, he’s uncertain about the outlook for the market. “The last few months have been euphoric for sellers and brokers, but good markets don’t last forever. We’re all wondering when it will change.”
On the San Francisco Peninsula, the market is also starting to turn. “In the last quarter, I’ve seen more people out looking – venture capitalists, investment bankers and executives – than I have for the past two years,” said Scott Dancer of Coldwell Banker in Woodside. “I’ve seen executives looking to relocate here to run companies, and that’s excellent for our market. Previously, these companies were downsizing. By the end of the year, we’re going to see an influx of high-end buyers pull the trigger and buy homes.”
About The 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 are properties that are 3,000 to 6,000 square feet, have 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 Cańada 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, Case Shiller Weiss 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 commercial bank and wealth management firm. The Bank specializes in providing personalized, relationship-based wealth management services, including private banking, investment management, trust, brokerage and real estate lending. As of March 31, 2004, the Bank had total banking assets and other assets under management and administration of $21.3 billion. First Republic Bank provides its services online and through branch offices in seven major metropolitan areas: San Francisco, Los Angeles, Orange County, San Diego, Santa Barbara, Las Vegas and New York City. More information is available on the Bank's Web site at http://www.firstrepublic.com.
Contact:
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- Blue Marlin Partners
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