California Luxury Home Values Continue Rising; Fourth Quarter Gains in SF Bay Area, Los Angeles and San Diego.

Business Editors

SAN FRANCISCO--(BUSINESS WIRE)--Feb. 20, 2001

Despite various indicators hinting at a possible economic slowdown, luxury home values rose throughout California during the fourth quarter of 2000, according to the First Republic Prestige Home Index(TM).

San Francisco Bay Area values yet again led the way and reached another record high, while values in Los Angeles and San Diego had their largest annual gains in more than a decade.

SF Bay Area Luxury Home Values Record Largest Annual Gain

According to the Index, the average value of a Bay Area luxury home during the fourth quarter of 2000 rose to a record $2,316,256, a 4.1% increase over the previous quarter and 38.8% higher than a year earlier.

"The 38.8% annual gain in 2000 is the largest in the history of the Bay Area Index," observes Katherine August-deWilde, chief operating officer of First Republic Bank. "During the last four years, Bay Area luxury home values have doubled."

While stock market fluctuations and other economic factors generally do affect luxury home prices, in the fourth quarter of 2000 that effect had not yet been felt.

"Buyers remain cautiously optimistic about the San Francisco luxury home market," comments Janet Feinberg Schindler of Hill & Co. in San Francisco. "Due to the amount of capital already in the marketplace and continuing tight inventory, we don't expect any softening in prices for at least another year."

"We're not seeing any lull in activity even though we're in the traditionally slower winter period," reports David Otero of Prudential California in Montclair. "Last year ended in strong fashion and this year has started out the same. Multiple offers over asking price are still common, especially for newly built homes in Rockridge and Montclair."

On the Peninsula, "2000 was a watershed year, one that may not be realized again in the near future," says Jim McCahon of Coldwell Banker in Woodside. "Though not as sizzling as last year, it's still a seller's market in 2001. However, now may be the best opportunity for buyers in two years as the market has retreated from its extreme levels."

In Marin County, the luxury home market is in full swing. "Inventory is still as scarce as ever and we continue to see multiple offers over asking price," reports Karen Plastiras of Pacific Union in Mill Valley. "Last year ended on a very busy note and there has been no lull at the start of this year." She also noted that during 2000 the average price of luxury homes, both single family dwellings and condominiums, rose 26% in Mill Valley, 28% in Belvedere, 29% in Kentfield, and 33% in Tiburon.

Los Angeles Luxury Home Values Have Largest Annual Gain Since 1989

The average value of a luxury home in Los Angeles rose during the fourth quarter of 2000 to $1,186,607 -- up only slightly over the third quarter but up 8.3% for the entire year.

"The 8.3% annual gain is the largest for Los Angeles luxury home values since 1989," states First Republic's August-deWilde. "Los Angeles values have had five consecutive quarters of increases and have reached their highest point since the third quarter of 1993."

Los Angeles and Orange County area real estate brokers report a robust beginning to this year's luxury home market.

"We have not seen any softening in either listing or selling prices due to the same factors of strong demand and limited inventory," notes David Mossler of Mossler, Deasy & Doe in Beverly Hills. "This year has begun even stronger than last year ended, as the market seemed to take off right after the holidays and has not paused since."

"Favorable interest rates are contributing to current market activity," adds Tom Dunlap of Prudential John Aaroe & Associates in Beverly Hills. "Buyers, though, seem more selective than last year and are not operating in a panic mode."

Orange County is experiencing strong luxury home activity, "especially for waterfront properties and homes in the Newport coastal community," says Carol Rudat, a broker with Roger's Realty in Corona del Mar and Seven Gables Real Estate in Tustin. "Last year ended with a flurry of sales and homes in escrow, and demand continues to be steady at the start of 2001."

San Diego Luxury Home Values Also Rise to Highest Level Since 1993

In San Diego during the fourth quarter of 2000, the average value of a luxury home reached $1,234,250 -- a 7.6% increase over the previous quarter and a 17.6% increase over the previous year.

"San Diego luxury home values had their largest quarterly increase since the Index began tracking quarterly gains in 1996, and, like Los Angeles values, realized their largest annual gain since 1989," notes First Republic's August-deWilde.

San Diego real estate brokers report a hectic end to 2000, but expect a more moderate market in 2001.

"The inventory crunch is beginning to ease somewhat due to new homes becoming available in The Covenant and Fairbanks," says Ann Brizolis of Coldwell Banker in Rancho Santa Fe. "Last year in The Covenant, the number of houses sold decreased from 1999 but prices increased an average of 17%."

Linda Sansone of Willis Allen Inc. in Rancho Santa Fe feels that prices should remain stable this year. "Last year there were more younger, newly wealthy buyers who were bidding on a limited number of properties. This year increased inventory and a greater number of buyers whose wealth does stem solely from the stock market should be moderating factors."

The First Republic Prestige Home Index(TM) tracks the value of homes worth $1 million+ in San Francisco and Los Angeles and $750,000+ in San Diego. The Index is the combined product of First Republic Bank, the leader in luxury home financing in California, and Case Shiller Weiss, Inc. of Cambridge, Mass., a pioneer of the repeat sales index and a recognized leader in tracking historical price trends of single-family homes.

The First Republic Prestige Home Index(TM) in each market is based on a portfolio of individually selected, single-family homes that have had their value traced back to 1985 using regression analysis. For each home in the portfolio, a market valuation was performed for each year taking into account repeat sales, comparable sales, and characteristics such as house size. The process is similar to one real estate appraisers use; however, the Index formula has a substantially larger database of more homes over a longer period of time.

Some common features of the luxury homes in the Index portfolios are: 3,000-5,000 square feet, three to six bedrooms, two and a half to six bathrooms, city lot sizes ranging from 25' x 100' to 50' x 138', and suburban lot sizes ranging from a quarter to two acres.

San Francisco Bay Area portfolio properties include a cross-section of homes valued at $1 million or more located in the following communities: 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 the Los Angeles portfolio represent a cross-section of homes valued at $1 million plus in the greater Los Angeles metropolitan area. Communities included in this portfolio are 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.

The San Diego Index portfolio represents a cross-section of homes valued at $750,000 plus in the following communities: Carlsbad, Coronado, Del Mar, Encinitas, La Jolla, La Mesa, Poway, Rancho Santa Fe, San Diego and Solana Beach.

The First Republic Prestige Home Index(TM) is the first statistical model of its kind customized to measure changes in high-end home values in key California urban markets. 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.

First Republic Bank is a publicly traded (NYSE:FRC) commercial bank with total assets of $3.7 billion. The Bank specializes in providing outstanding relationship-based service in private banking, investment management, trust and brokerage services, and real estate lending. Its investment advisory subsidiary, Trainer Wortham & Company, founded in 1924, manages over $3.9 billion in assets. First Republic provides its services in five major metropolitan areas: San Francisco and Silicon Valley; Los Angeles, Beverly Hills and Newport Beach; San Diego; Las Vegas; and New York City. More information is available on the Bank's Web site at www.firstrepublic.com.