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November 28, 2005 Greg Berardi Blue Marlin Partners California Luxury Home Values Climbed Strongly In The Third Quarter Los Angeles Remains Strong; San Diego and San Francisco Show Signs of Slowing SAN FRANCISCO - Luxury home values rose to all-time highs in Los Angeles, San Diego and San Francisco in the third quarter of 2005 compared to a year ago, according to the First Republic Prestige Home Index by First Republic Bank, one of California's leading providers of full-service banking, investment management, brokerage and trust services. The Index, which has tracked luxury homes since 1985, found: "Luxury home prices in California set records again in the third quarter of 2005, although there are clear signs of a slowing trend," said Katherine August-deWilde, Chief Operating Officer of First Republic Bank. "Throughout California, luxury home values and activity are expected to moderate as the market takes a breather after a prolonged period of significant appreciation." First Republic Bank (NYSE: FRC) produces the Prestige Home Index each quarter with Fiserv CSW Inc., 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 Area Values Luxury home values in Los Angeles continued to appreciate faster than anywhere else in the state on the strength of the entertainment industry and the overall diversity of the region's economy. "It's amazing what's going on," said Barbara Tenenbaum of Coldwell Banker in Beverly Hills. "The market is still quite strong. If a house doesn't sell in the first couple of weeks, the price is reduced and then there are multiple offers. Because there is a shortage of inventory and good properties, the market keeps going. Interest rates aren't a factor at all." In Orange County, the market is slower than in Los Angeles. "Houses are definitely staying on the market for a lot longer," said Cathy Kroopf of Prudential California Realty in Newport Beach. "What used to sell in 30 days is on the market 60 days to 120 days. Prices are leveling, but they haven't gone down. If they do drop, it will be modest. Newport Beach is a destination where people want to be. I think prices will increase 10% in 2006." San Diego Area Values In San Diego, the 11.6% increase on a year-over-year basis was the smallest gain in the past seven quarters. Despite the deceleration, luxury homes in San Diego have nearly doubled in the past five years. Chuck Gifford of Coldwell Banker in Rancho Santa Fe said the market is actually returning to normal after several years of rapid appreciation. "It is a level, normal market compared to what it was." He noted that there isn't an abundance of inventory, but if a large number of homes go up for sale in January, it portends a slow year in 2006. "If inventory goes up sharply, I see prices negatively impacted, but it will be gentle, not significant." Toni Cieri of Distinctive Properties RE/MAX in Del Mar said rising interest rates and oil prices, uncertainty about the economy and seasonal slowness have all weakened the market. "To get something sold, we're lowering the price and offering higher commissions to the brokers. It has to be a very attractive package for both buyer and broker." San Francisco Bay Area Values In the San Francisco Bay Area, values posted the sixth consecutive quarter of double-digit gains in the third quarter of 2005. Despite the increase on a year-over-year basis, agents said the market has slowed noticeably. "We've been spoiled for so long," said Birgit Hall of Coldwell Banker in San Francisco. "Buyers are now coming back three, four and five times, and they still don't write an offer. I haven't seen it this quiet for a long time." Malcolm Kaufman of McGuire Real Estate in San Francisco agreed. "The market has certainly changed. I don't know that it is a buyer's market yet, but we're in a transition phase and coming off the peak, which was in the summer." Kaufman said the market appeared to change markedly after Hurricanes Katrina and Rita. In the Wine Country, the market is also softer, although high-end buyers are still active. "There have been several sales over $5 million, which is unusual," said Diane Flyr of Pacific Union in St. Helena. "In the $1 million to $3 million range, there are fewer buyers, and they are pickier. However, if the home is priced well, and it doesn't need a whole lot of work, then it will sell. This is a lifestyle market and a very special place." About The First Republic 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: 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 Ca–ada 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, Fiserv CSW, Inc. 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 September 30, 2005, the Bank and its subsidiaries had total Bank assets and other managed assets of $26.5 billion. First Republic Bank provides access to 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 website at www.firstrepublic.com. |