Luxury home values rose 3 percent in Los Angeles from the first quarter of 2006 to the second quarter and climbed 12.8 percent from a year ago, according to a quarterly report by First Republic Bank.
The First Republic Prestige Home Index also showed that the average home in Los Angeles is worth $2.36 million, up $268,250 from a year ago. Luxury home values increased 0.1 percent in the first quarter and 0.7 percent in fourth-quarter 2005 in Los Angeles.
San Diego values grew 1.8 percent from the first quarter of 2006 to the second quarter of 2006 and were up 6.4 percent from a year ago. Values increased 0.9 percent in the first quarter and 0.7 percent in fourth-quarter 2005.The average luxury home in San Diego reached a record $2.14 million in the second quarter, up $128,372 from a year ago.
San Francisco Bay Area luxury home values increased 0.3 percent from the first quarter of 2006 to the second quarter and rose 4.8 percent from a year ago, First Republic also announced. The average luxury home in San Francisco reached a record $2.93 million in the second quarter, up $134,978 from a year ago.
“Over the past year, the luxury home market in California has transitioned to a more normal, stable market in which properties sell at a more measured and less frenetic pace,” said Katherine August-deWilde, chief operating officer of First Republic, in a statement. “Luxury home values continue to increase, but at a much slower rate due to rising inventory and interest rates. Homes are being priced more aggressively to sell because buyers have more options.”
First Republic Bank produces the Prestige Home Index each quarter with Fiserv CSW Inc., a provider of automated property valuation services and home price metrics to U.S. financial institutions.
“(Los Angeles-area) agents said that the market above $10 million remains strong, although the mid tier of the luxury market has slowed. Buyers are choosier because inventory has increased markedly, and there is a greater emphasis on value,” according to the First Republic announcement.
“Certainly, the white-hot market of a year-and-a-half ago is gone,” said Michele Hall of Coldwell Banker’s Brentwood East office. “We got used to homes selling yesterday, but now properties must be priced right. Homes that are in move-in condition will sell the fastest. Those that need work will take much longer.”
Bennett Carr of Prudential Estate Properties in Beverly Hills said the number of sales between $2.5 million and $5 million is down 20-30 percent in 2006 on the West Side of Los Angeles, while sales between $5 million and $10 million are up 15-20 percent, and sales above $10 million jumped up 88 percent. “Los Angeles is becoming a national and international destination,” Carr said. “The wealthy from abroad want more estate-like properties — more than we can supply.”
In Orange County, homes above $5 million continue to sell well. Agent Bill Cote of Cote Private Brokerage in Corona Del Mar said sales in that price range climbed 13 percent compared to last year, although sales are off about 15 percent between $3 million and $5 million. “We’ve been spoiled by the market of the past few years,” Cote said. “I still anticipate a solid market for the rest of 2006.”
San Diego-area agents said the upper end of the market remains robust, while the lower to middle part of the luxury market has slowed noticeably. “The upper end is as strong as it ever has been, and it’s amazing the prices sellers are getting,” said Ozstar De Jourday of California Prudential Realty in La Jolla. He said there have been a significant number of sales above $10 million recently.
Wendy Ramp of Prudential California Realty in Del Mar said the mid-tier has clearly softened. “In the second quarter, the market stalled, although there has been a slight pick-up in the third quarter. For the past seven years, we haven’t had a slowdown, and we didn’t have enough product. Now we have too much for sale.” She said that some sellers are reducing prices and noted that transactions are falling out of escrow at a higher rate.
In San Francisco, second-quarter appreciation was at its slowest rate since third-quarter 2004. Over the past two years, quarterly increases in the San Francisco Bay Area have been no greater than 6 percent, First Republic reported.
Agents in the San Francisco Bay Area said that the market overall has weakened over the past year, while properly priced homes are still selling.
“The market between $2 million and $6 million is really strong because of continuing demand,” said Caroline Kahn Werboff of Hill & Co. in San Francisco. “If the house is priced fairly, you’re seeing multiple offers at or a little over the asking price. Interest rates would have to get up to double digits to make a significant difference.” In the high end of the market, Kahn Werboff said there have been some price reductions. She said some buyers are reluctant because they believe prices will decline.
David Gowan of TRI Coldwell Banker said the market is more balanced, although slower than it has been in recent years. “Instead of selling in two weeks, properties are selling in two months, just like they would in a normal market. What we’ve seen the past six years is unusual.” Gowan said buyers are generally making offers slightly under the asking price.
In San Francisco’s East Bay, the market is slowing. “Over $2 million, our inventory is up and buyers aren’t in a terrible hurry,” said Tara Rochlin of Village Associates in Orinda. “We’re seeing more sellers willing to negotiate and lower their prices. We’re headed toward a more balanced market, which is better for everyone over the long term.”
The First Republic Prestige Home Index is intended to measure changes in homes valued at more than $1 million in large California urban markets. Common features of luxury homes in the Index include: 3,000 square feet to 6,000 square feet, three to six bedrooms, and three to six bathrooms.
Fiserv CSW Inc. 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 local market knowledge in creating the index.