California Luxury Home Values Post Large Gains in 2004

SAN FRANCISCO, Feb. 24 /PRNewswire-FirstCall/ -- Luxury home values in Los Angeles rose a record 27% in 2004, while home prices in San Diego and San Francisco posted double-digit gains in 2004, according to the First Republic Prestige Home Index(TM) 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: -- Los Angeles values jumped 1.5% from the third quarter of 2004 to the fourth quarter of 2004 and rose 27.7 percent for the year -- the largest annual increase ever for Los Angeles. The average luxury home in Los Angeles is now a record $1.97 million, up $428,000 from a year ago. -- San Diego values declined 0.9% from the third quarter of 2004 to the fourth quarter of 2004, but were up 16.4 percent for the year. The average luxury home in San Diego is now at $1.84 million, up $260,000 from a year ago. -- San Francisco Bay Area values rose 0.7% from the third quarter of 2004 to the fourth quarter of 2004 and gained 13.7% for the year. The average luxury home in San Francisco is now a record $2.55 million, slightly ahead of the all-time high set in the second quarter of 2004.

"In 2004, luxury home values in California experienced one of strongest years on record, with Los Angeles posting record highs, and San Diego and San Francisco seeing solid double-digit increases," said Katherine August-deWilde, Chief Operating Officer of First Republic Bank. "Throughout California, robust demand and limited supply continue to drive luxury home prices, but it is unlikely values will appreciate as rapidly this year as they did in 2004."

First Republic Bank 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 http://www.firstrepublic.com/.

Los Angeles Area Values

In Los Angeles, the 27.7% increase in 2004 followed a gain of 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 $600,000 to almost $2 million.

Real estate agents said the momentum in 2004 has carried over into the first part of this year.

"2005 is starting out just like 2004, which was extraordinary," said agent Mary Beth Woods of Coldwell Banker in Brentwood. "Last year was extremely strong because interest rates were low, and housing was easier for investors to understand than the stock market," Wood said. She noted that multiple offers over the asking are common in Brentwood and other high-end neighborhoods because of strong demand and limited inventory.

In the San Fernando Valley, luxury home values also rose sharply last year. However the torrid rise in prices will slow in 2005, although double-digit gains are still likely. "The market is strong, but it is deceptive. There isn't a slowdown, rather there is a just a lack of inventory," said agent Monty Iceman of Prudential John Aaroe in Encino. "In 2005, we're looking at increases of 10% to 20%. That's a big range, but I certainly don't see prices going down."

In Orange County, values rose strongly in 2004, though prices dipped in the fourth quarter of the year. Through the first two months of 2005, activity has picked up, but that may not translate into higher prices. "I don't see prices going up in 2005," said agent Carol Rudat of BARRONS Real Estate in Newport Beach. "Toward the end of 2004, prices were dropping because they were overvalued." Rudat said there are few multiple offers, and prices are coming in just under asking in the first two months of the year.

San Diego Area Values

In San Diego, the 16.4% gain in 2004 was one of the largest ever for the region. Values rose 8.7% in 2003, 3.3% in 2002, 14.1% in 2001 and a record 17.6% in 2000.

Throughout the San Diego area, the luxury market cooled in the fourth quarter of 2004 after double-digit gains in the first three quarters of the year. The market has turned more active in the first two months of 2005, although buyers appear to be more patient.

"The market from $1 million to $2 million is a little flat," said agent Melissa Lagorio of Coldwell Banker in La Jolla. "There isn't enough inventory, but buyers are definitely more discerning. In 2005, the market under $1.5 million will see single or low double-digit increases. Above $2 million, prices will appreciate in the low double digits. The market won't be as strong this year as it was in 2004."

In Rancho Santa Fe, the market experienced the usual holiday slowdown in the fourth quarter, but that continued into the first quarter of 2005. "We're into a buyer-cautious market," said agent Cutter Clotfelter of Willis Allen in Rancho Santa Fe. "It hasn't flipped from a sellers' market to a buyers' market, but the buyers are more educated and taking their time." Clotfelter said many buyers expected a mild correction in prices, although he believes values will grow by single digits in 2005.

San Francisco Bay Area Values

In San Francisco, the 13.7% increase in 2004 was the largest rise since the record 38.8% increase at the height of the dotcom boom in 2000. Values roles 0.3% in 2003, 3.6% in 2002 and fell 7.1% in 2001.

Values increased slightly in the fourth quarter of 2004, but the market has been very strong through the first two months of this year.

"The market from $1 million to $2.5 million has been fast and furious in the first quarter of this year," said agent Caroline Kahn Werboff of Hill & Co. in San Francisco. "I think the market took a huge jump in January, and the market is heating up more quickly than we anticipated because there is very little inventory. From $2.5 million to $4 million, it is a really a solid market. We're seeing multiple offers and prices over the asking. It is a sellers' market right now."

In Silicon Valley, 2004 was a very strong year and this year is off to good start. "2004 was a stellar year. It never cooled off," said agent Homa Adnani of Alain Pinel Realtors in Palo Alto. "This year, the market has been strong, and every house has sold with seven to ten offers," Adnani said the $4 million to $6 million range is also robust because of the recent wealth generated by newly public high-tech companies in the area.

In Marin County, the market is also picking up. "In 2004, we generally had a sellers' market, particularly under $1.5 million, but in the upper end it was a buyers' market," said agent Karen Plastiras of Pacific Union Luxury Home Sales in Tiburon. "In 2005, it is going to be a stronger market." Plastiras said prices are likely to rise because there is very little inventory and strong demand.

About The First Republic Prestige Home Index

The First Republic Prestige Home Index(TM) 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, 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 private bank and wealth management firm. The Bank and its subsidiaries specialize in providing personalized, relationship-based wealth management services, including private banking, private business banking, investment management, trust, brokerage and real estate lending. As of December 31, 2004, the Bank and its subsidiaries had total Bank assets and other assets under management and administration of $24.7 billion. First Republic Bank provides its services online and through preferred banking 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/.