California Luxury Home Values Increase In 2005Double-Digit Gains For The Year, But Values Slow in Fourth QuarterFeb 22, 2006 SAN FRANCISCO — Luxury home values rose to all-time highs in Los Angeles, San Diego and San Francisco in 2005 on the strength of double-digit gains, but appreciation slowed significantly in the fourth quarter, according to the First Republic 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:
"In 2005, luxury home values in California appreciated at double-digit rates, although the momentum clearly slowed in the second half of the year," said Katherine August-deWilde, Chief Operating Officer of First Republic Bank. "Continuing demand and limited inventory in some markets may result in increased luxury home prices in 2006, but at a very modest level compared to the past two years. In markets where inventories spike, values will be impacted." 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 www.firstrepublic.com. San Francisco Bay Area Values - [view the graph and table]In San Francisco, the 13.2% increase in 2005 followed a gain of 13.7% in 2004, 0.3% in 2003, 3.6% in 2002 and a decline of 7.1% in 2001. Since December 2002, the average luxury home in San Francisco has increased more than $651,000 to almost $2.9 million. The San Francisco market is also off to strong start after a slow fourth quarter. "I think 2006 is going to be a very strong year – it has definitely started out that way," said Janet Feinberg Schindler of Sotheby's International Realty in San Francisco. "There are lots of buyers and inventory is truly low." A lack of properties has also produced a growing number of private sales at top dollar before they come to market. "As buyers and agents scramble for inventory, we may see more quiet sales," Schindler said. Val Steele, an agent with Coldwell Banker in San Francisco, said 2006 has started modestly. "I think it will be a late spring market," Steele said. "We're not going to see much until after President's Day. The market has been slow, but only because of a lack of inventory." In 2006, Steele also said she expects more activity at the high end of the luxury market, which she said is undervalued. In the East Bay, D.J. Grubb of The Grubb Company in Oakland said the market is realigning after a strong 2005, but he sees growth for 2006. "The market isn't going through an identity crisis and I don't think there is a bubble, but we are seeing a healthy correction. What is surprising is all the money in the marketplace. There are a lot of all-cash offers or those with minimal financing." Los Angeles Area ValuesIn Los Angeles, the 16% increase in 2005 followed a gain of 27.7% in 2004, 14.9% in 2003, 3.6 % in 2002, 9.4% in 2001 and 8.3% in 2000. Since December 2002, the average luxury home in Los Angeles has increased more than $945,000 to almost $2.3 million. Agents said that the market is off to a robust start in 2006 after a slow fourth quarter. "We are in a different market in early 2006 than we were at the end of 2005," said David Offer of Prudential California Realty in Brentwood. "There are multiple offers on appealing and competitively priced properties. That's in contrast to the last quarter of 2005, when even good properties that were well-priced were sitting." Offer said the market is being propelled by a lack of inventory and a large pool of buyers who stayed out of the market toward the end of the year. "From what I'm seeing in the first 45 days of 2006, the market is as strong as it ever has been at this point in the year. We're on course to see 10% or higher appreciation in 2006." In Orange County, the market is showing strength in early 2006 after trailing off in 2005. "We're off to a good start in 2006," said Ken Bowen of RE/Max Real Estate Services in Rancho Santa Margarita. "There is a lot of activity, with many buyers and limited inventory. Bowen expects values to rise 10% to 12% in 2006, with most of that appreciation in the first half of the year. In the Santa Barbara area, the market remains solid. "I see continued stability, strength and depth in the market," said Randy Solakian of Coldwell Banker Previews in Montecito. "I don't see a lot of volatility." Solakian expects a 10% to 12% appreciation in 2006. San Diego Area ValuesIn San Diego, the 13.3% increase in 2005 followed a gain of 16.4% in 2004, 8.7% in 2003, 3.3% in 2002, 14.1% in 2001 and a record 17.6% in 2000. Since December 2002, the average luxury home in San Diego has increased more than $630,000 to almost $2.1 million. Agents said the market has regained some of its momentum after a very quiet December. "The market is changing month to month," said Benny Landman of Coldwell Banker in Del Mar. "December was absolutely dead and January picked up. It's still a seller's market, but it's slower." Agent Earl Houston of Prudential California Realty in Carlsbad said 2006 is likely to be very solid, but was surprised with the lack of activity in the fourth quarter. "For the first time in many years, Thanksgiving to New Year's was very slow, but we now have a very healthy, normal market." Houston said it is taking 60 to 90 days to sell a house now, instead of several weeks, which was common in the first half of 2005. |
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