Luxury home values in California rise 3 percent in 2002
February 26, 2003
Despite economic uncertainty, luxury home values in California rose 3 percent in 2002, with Southern California values rising to some of their highest levels ever, according to the 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 homes valued at more than $1 million since 1985, found:
- Los Angeles values rose 3.6 percent in 2002 compared to 2001 and were up 3 percent in the fourth quarter, compared to the third quarter of 2002. The fourth quarter increase drove Los Angeles values to $1.34 million, their highest level since 1992.
- San Diego values gained 3.3 percent in 2002 and climbed 2.5 percent in the fourth quarter, compared to the third quarter of 2002. Values climbed to $1.45 million, their highest levels in the 17-year history of the Prestige Home Index.
- San Francisco values rose 3.6 percent for all of 2002 and were down 0.3 percent in the fourth quarter of 2002, compared to the third quarter of 2002. The average value of a luxury home in San Francisco stood at $2.23 million at the end of 2002.
"Luxury home values in California held their own in 2002 in spite of continuing economic uncertainty," said Katherine August-deWilde, Chief Operating Officer of First Republic Bank. "Los Angeles and San Diego values are at or near all-time highs, while San Francisco values are stable after coming down off their peak in 2001. Because of the unknown nature of world events, we remain cautious about values in 2003, but we see no significant signs of a decline in values in metropolitan Los Angeles, San Diego and San Francisco."
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 www.firstrepublic.com.
Los Angeles Values Edge Higher
Los Angeles values stood at $1.34 million at the fourth quarter of 2002, compared to $1.29 million at the end of 2001. The last time values were this high was in 1992, when average values were $1.49 million. With the exception of a 2.7 percent decline in the first quarter of 2002, values rose modestly every quarter in Los Angeles during the year.
David Mossler, of Mossler, Deasy & Doe in Beverly Hills, said the strength of the entertainment business and lack of inventory in Southern California continue to drive the luxury home market. "In West Los Angeles, there is great demand for quality houses that are well-priced, but I have buyers who can't find houses. Many of these homes on the market are overpriced, but if they were priced properly, they would sell."
Kevin Lehman, of Prudential California Reality in Thousand Oaks, said 2002 was a year of higher prices and consistently strong sales. "Prices in the luxury home market continued to go up, and homes sold rapidly. Supply and demand continues to be at work here. This area is a beautiful place to live and work. Prices are going to increase this year."
In Orange County, Randy Kershaw of Rogers Realty in Corona del Mar agrees that the market was strong in 2002, and he sees no signs of slackening. "From Thanksgiving 2001 until now, the market was on fire. We had about a year and a quarter of pretty healthy increases in both price and sales volume. We're now sitting on two months' inventory; it's considered a good market when there is seven months of inventory. Our biggest challenge today is that we have more buyers than sellers."
San Diego Values Rise To All-Time High
San Diego values averaged $1.45 million at the end of 2002 -- the highest level in the 17-year history of the Prestige Home Index -- compared to $1.4 million at the end of 2001. With the exception of a 0.4 percent decline in the second quarter, San Diego values edged higher in every quarter of 2002.
Ann Brizolis, of Coldwell Banker in Rancho Santa Fe, said San Diego's unique combination of good weather, a large inventory of luxury homes, and a steady stream of buyers from outside the area are keeping prices firm. In the second half of 2002, she said there were five sales between $9 million and $17 million in the Rancho Santa Fe area and said there appears to be no housing bubble in the San Diego luxury market. "We have people coming from other parts of the country, from Orange County and from Northern California," Brizolis said. "They are young retirees, ages 45 to 55, who are looking for lifestyle and environment." In the first quarter of 2003, Brizolis said concerns about possible war in the Middle East prompted some buyers to hold off on making decisions. Once the issue in the Middle East is resolved, she expects increased activity and rising prices -- similar to the rebound that occurred in the months following Sept. 11.
Cutter Clotfelter, of The Willis Allen Co. in Rancho Santa Fe, said luxury home prices increased in 2002 because of strong demand, although activity has been slow from December through the first part of February. "It's turning from a sellers' market to more of a buyers' market. Buyers are seeing more inventory, and they are more finicky. As a result, they aren't buying rapidly - unless the right product is on the market." Over the past few weeks, however, Clotfelter has seen a surge in activity. "We started to see a lot more activity recently."
San Francisco Values Rise in 2002
Luxury home values in San Francisco were $2.23 million at the end of 2002, compared to $2.15 at the end of 2001, and a high of $2.39 million in the second quarter of 2001. San Francisco posted modest declines in the first and fourth quarters of 2002, and 2 percent increases in the second and third quarters of the year.
Lea Ann Fleming, of McGuire Real Estate in San Francisco, said that despite the current anxiety about world events, luxury homes sold at a brisk pace last year. In 2002, Fleming said her office posted double-digit gains in dollar volume, and the average transaction price was up.
"We're seeing houses that were on the market in the $2 million to $3 million range that are now going into contract," Fleming said. "Some of these houses were on the market last fall, and are now back on the market with price reductions. Buyers are still out there, and they are acting if they think the property is priced right."
Steve Gothelf, of Pacific Union Real Estate in San Francisco, concurs that the potential for war has kept some buyers out of the market, but he started seeing greater activity in February, particularly among properties with views of San Francisco and the surrounding area. "In the fourth quarter of 2002, prices were flat. However, it seems as if, at least on some level, the luxury market woke up in February. A number of properties have gone into contract and closed. The market seems selectively active."
In the Wine Country north of San Francisco, prices and sales volume remain firm. Diane Flyr, of Pacific Union Real Estate in St. Helena, said there were 100 publicly listed sales of homes of more of than $1 million in 2000, compared to 98 sales in 2002. Average prices in 2002 were higher than in 2000. "For people in the Bay Area who want to get away from San Francisco but still want to be close to it, Napa is one of the most attractive areas because it has all the agriculture ambience, and also has all the food, wine and culture."
About The Prestige Home Index
The First Republic Prestige Home Index 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 are properties that are 3,000 to 6,000 square feet, have 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.
Source: First Republic Bank