Los Gatos Weekly-Times

Homes

Luxury home values are hitting record highs

By Rose Meily

The housing market continues to be healthy as market conditions return to normal. In fact, the value of high-end homes in San Francisco, Los Angeles and San Diego posted record highs in the third quarter of 2006, according to the First Republic Prestige Home Index™, which tracks homes valued at more than $1 million in key California markets. Despite rising inventories and longer sales cycles, luxury-home price appreciation posted modest gains in all three markets, the report states.

The values of luxury homes in the Bay Area rose 4 percent; San Diego, 5.4 percent; and Los Angeles 4.4 percent. According to the index, the average luxury home in San Francisco is now valued at $2.96 million, while the average luxury home values in San Diego and Los Angeles are $2.18 million and $2.37 million, respectively.

The Index, which has tracked luxury homes since 1985, found:

* Bay Area values increased 1.1 percent from the second quarter of 2006 to the third quarter and gained 4 percent from a year ago. The average luxury home in San Francisco is now a record $2.96 million.

* Los Angeles values rose 0.6 percent from the second quarter of 2006 to the third quarter and climbed 4.4 percent from a year ago. 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 of 2006 to the third quarter and gained 5.4 percent from a year ago. The average luxury home in San Diego is now a record $2.18 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."

First Republic Bank reports in the Bay Area, luxury homes continued the recent pattern of small quarterly gains. Increases have ranged between 0.3 percent and 1.8 percent over the past five quarters. Values have risen modestly for eight quarters.

Despite the slight increase from the second quarter, market conditions varied widely in the region. 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."

"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."

Coldwell Banker Realtor Leannah Hunt said in Palo Alto the market continues to be strong for all home types. "It's a very strong market, and recently, we had very strong sales for two homes in old Palo Alto. One home sold for $6.5, million and the other sold for $5.7 million," said Hunt.

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.

In Los Angeles, the market cooled markedly in the third quarter, particularly year-over-year. Values increased just 4.4 percent from the third quarter of 2005 to the third quarter of 2006 after 14 straight quarters of double-digit year-over-year gains that dated back to the first quarter of 2003.

Properties in Los Angeles represent a cross-section of luxury homes in Arcadia, Beverly Hills, Calabasas, La Cañada 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.

In San Diego, luxury home values rose 1.9 percent from the second quarter of 2006, but year over year the increases have been declining for the past six quarters. 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 $8million, the market is also hot. Between those price ranges, there is more competition because new inventory is coming onto the market."

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.