Luxury home values posted slight gains in Los Angeles, San Diego and San Francisco in the third quarter of 2006, as housing markets overall continued to see a slip in sales.
Values on homes worth more than $1 million were up 0.6 percent in Los Angeles from the previous quarter and up 5.4 percent from a year ago, according to an index released by First Republic Bank, a provider of wealth management and private banking services. The average luxury home in Los Angeles is now a record $2.37 million.
San Diego values increased 1.9 percent from the second quarter, and gained 5.4 percent from a year ago. The average luxury home in San Diego is now a record $2.18 million.
San Francisco Bay Area values increased 1.1 percent from the second quarter and gained 4 percent from a year ago. The average luxury home in San Francisco is now a record $2.96 million.
“Luxury home values posted very modest increases in the third quarter in Los Angeles, San Diego and San Francisco,” said Katherine August-deWilde, chief operating officer of First Republic Bank. “This trend is due to growing inventory, longer sales time, and greater caution among buyers because of the uncertainty in the market.”
In Beverly Hills, buyers are more cautious than they have been in several years. “There is some hesitation in all price ranges,” said Steve Frankel of Coldwell Banker Previews Estate Division in Beverly Hills. “I am still getting lots of showings on properties $10 million and above, but buyers are being sensitive. They’re saying, ‘I am willing to pay, but I’m not willing to overpay.’ Two years ago, they would overpay and wait for the market to catch up.”
In Montecito, near Santa Barbara, the number of sales is falling. “There are still legitimate buyers and sellers out there, but it is a difficult market,” said Jeff Farrell of Coldwell Banker Previews International in Montecito. “Prices and inventory in Montecito have stayed about the same. But buyers are more reluctant, and sellers don’t want to bite the bullet to put prices where they should be. There are definitely transactions happening, but they are fewer.”
In the beach communities of Orange County, the number of sales is also down significantly, although prices are still stable. “In the coastal market at $3 million and above, homes are still selling fairly well,” said Rob Montgomery of HOM Real Estate in Newport Beach. “Generally speaking, sales volume has been down 30 percent to 35 percent, but pricing has gone up as much 8 percent or 9 percent.”
In the luxury community of Rancho Santa Fe, sellers are adjusting their expectations. “It’s definitely a buyers’ market,” said Madeleine Gere of Gere Group Properties in Rancho Santa Fe. “The buyers are there, but they’re being very cautious. They’re waiting to see how prices will go. When a home is priced right, it’s a multiple offer situation. Demand is keeping the market alive here. The whole world wants to be here.”
However, in the coastal communities of La Jolla, Del Mar and northern San Diego County, the market is somewhat strong. “From $2 million to $4 million, the market is hot in Del Mar and La Jolla,” said Janet Lawless Christ of Coldwell Banker Previews in Rancho Santa Fe. “Above $8 million, the market is also hot. Between those price ranges, there is more competition because new inventory is coming onto the market.”
In San Francisco, prices and sales appear to be falling. “I see price reductions, and homes selling below the asking price,” said Naomi Glass of Coldwell Banker in San Francisco. “Few things are moving. People are hesitant because they see an uncertain market.”
On the San Francisco Peninsula, the market is also trending downward. “In Los Altos Hills, it is a buyers’ market,” said Ethel Green of Intero Real Estate in Los Altos. “People are very discerning and slow to make decisions. The home has to be in pristine condition to sell. People who are not getting the prices they want are taking their houses off the market. It’s actually a great time to buy.”
In Marin County, the lower tier of the luxury market is doing well. “The market from $2 million to $4 million feels strong,” said Tina McArthur of Pacific Union in Larkspur. “We just had eight offers on a home that went over the asking price. If a house is done nicely, is on flat land and is the quintessential family home, no one is batting an eyelash over these prices.”
First Republic’s Prestige Home Index is produced each quarter with Fiserv CSW Inc., a provider of automated property valuation services and home-price metrics to U.S. financial institutions.