California Luxury Home Values Decrease

California luxury home prices declined in the third quarter of 2008 from a year ago and from the second quarter of 2008, according to the First Republic Prestige Home Index(TM) by First Republic Bank, a leading provider of private banking, private business banking and wealth management services.

In the quarter ended Sept. 30, 2008, the Index indicated the following:

– Los Angeles area values fell 1.9% from the second quarter of 2008 and 4.2% from the third quarter of 2007. The average luxury home in Los Angeles is now $2.33 million.

– San Diego area values dropped 2.1% from the second quarter of 2008 and 7.5% from the third quarter of 2007. The average luxury home in San Diego is now $1.98 million.

– San Francisco Bay Area values declined 0.7% from the second quarter of 2008 and 3.0% from the third quarter of 2007. The average luxury home in San Francisco is now $2.99 million.

“Values of luxury homes declined in the third quarter in response to turmoil in the financial markets and the underlying weakness in the broader housing market,” said Katherine August-deWilde, President and Chief Operating Officer of First Republic Bank. “Further price declines are likely due to the overall slowdown in the U.S. and global economies.”

First Republic Bank 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 http://www.firstrepublic.com. The Index has tracked luxury homes since 1985.

Los Angeles Area Values

In the third quarter, values in the Los Angeles area fell for the fourth time in the past five quarters. Average luxury values are down from a high of $2.46 million set in the second quarter of 2007.

In Beverly Hills, Billy Rose of Prudential California Realty said that economic uncertainty and stock market volatility have made it challenging for both buyers and sellers. “We’re really seeing just two types of sales now. The first is the unbelievable bargain that is clearly very cheap. The other is the irreplaceable buy — a property so special that it is an emotional purchase. Among sellers, many are trying to figure out what to do. The volatility in the equity markets is impacting the housing market.”

Scott Gibson of Gibson International Realty in Los Angeles said both buyers and sellers need to adjust their thinking in the current environment. “Sellers need to recognize we’re in a declining market and probably will be for a bit. Buyers should be thinking about holding a home for five to seven years. They shouldn’t be buying for an investment, but rather to live in a nice home.”

San Diego Area Values

Values in the San Diego area have now declined for five straight quarters, both on a quarterly and year-over-year basis. For the first time since the first quarter of 2005, the average price of a luxury home in the region fell below $2 million. Values hit a high of $2.19 million in the second quarter of 2007.

“We’re in a depreciating market,” said Janet Christ of Coldwell Banker Previews in Rancho Santa Fe. “But the buyers have not gone away. They are just not going to move in an overpriced market. If sellers are serious, they need a great price to get the attention of the buyer pool. Sellers are just starting to recognize the reality of this market — that prices are soft. The good news is that the house they want to buy is also getting less expensive.”

Agent Jeannie Gleeson of Prudential California Realty in La Jolla agreed that prices are falling and that sellers need to reset their thinking. She also noted that buyers are still in the market, but the property needs to be in move-in condition and perceived as a value. “If the home is turnkey, is in the right location and priced realistically with the comparables in the neighborhood, you should have a sale.”

San Francisco Bay Area Values

In the San Francisco Bay Area, values fell to $2.99 million in the third quarter of 2008.

Gloria Smith of Sotheby’s International Realty said most buyers are looking for a bargain before making an offer. “In the $3 million to $5 million range, there are still some buyers for special properties, but they are looking for a deal. In the $10 million and above range, everyone is looking for a deal. Buyers are willing to wait until prices come down. At the same time, some sellers are pulling their properties off the market because they believe the current purchase prices are too low.”

In Palo Alto, the market has remained flat, but buyers have growing concerns about the strength of the technology sector in Silicon Valley. “Buyers are concerned about future appreciation when they are thinking about making an offer,” said Ken DeLeon of Keller Williams Realty in Palo Alto. “There has been more trepidation in the market than normal. I anticipate a further slight decline in values for at least the next three months.”

About The First Republic Prestige Home Index

The First Republic Prestige Home Index(TM) 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 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, 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 private bank and wealth management company offering personal banking, business banking, trust, brokerage and wealth management services. The Bank specializes in delivering personalized relationship-based service through preferred banking or trust offices in ten major metropolitan areas: San Francisco, Los Angeles, Santa Barbara, Newport Beach, San Diego, Las Vegas, Portland, Seattle, Boston and New York City. First Republic offers wealth management services through First Republic Wealth Advisors and First Republic Investment Management. Brokerage services are provided through First Republic Securities Company, LLC, and trust services are provided through First Republic Trust Company. More information is available on the Bank’s website at http://www.firstrepublic.com. First Republic is a division of Merrill Lynch Bank & Trust Co., FSB.