Luxury Home Prices Under Pressure

The nation’s housing collapse is moving into luxury homes, according data released Monday by First Republic Bank, which specializes in ultra-jumbo mortgage lending. Luxury home prices — homes priced above $1,000,000 — remained flat in San Francisco in the second quarter of 2008 compared to a year ago, but both Los Angeles and San Diego continued to post declines; and when the best you can say about a luxury home market is that it’s “flat,” you know there’s some trouble in paradise. In Los Angeles, luxury values increased 1 percent from the first quarter of 2008, but fell 3.8 percent from the second quarter of 2007. The average luxury home in Los Angeles is now $2.37 million, First Republic said. San Diego area luxury values dropped 2 percent from the first quarter of 2008, and are off 7.8 percent from the second quarter of 2007. Agents said there was uncertainty about where the market is headed. “We have a lack of credit availability,” said Bennett Carr of Sotheby’s International Realty. “I don’t think the market is going to improve until the credit situation improves.” Carr noted that the market above $10 million was the strongest, while homes valued between $2.5 million and $5 million had been the most impacted. “If the property is not 100% perfect, the buyers are just walking away,” said Mary Beth Woods of Coldwell Banker in Brentwood, Calif. “For a home to sell at the asking price, it needs to be a premium property in a premium location and in premium condition.” Only the San Francisco Bay area saw values rise — barely — up 0.1 from the first quarter of 2008, and up 0.2 percent from on year ago. The average luxury home in San Francisco is now at an all-time high of $3.01 million, as a result, according to the First Republic data. In San Francisco, agents said the market remains strong for good properties in good locations, with multiple offers and offers over the asking. “Transaction counts are down, but prices are up in the luxury market,” said David Papale of Alain Pinel Realtors in San Francisco. “Homes in the $3 million range are selling briskly. If the home is priced properly, it is moving very quickly.” “Values of luxury homes throughout California remain under pressure due to increased caution among buyers, although attractive properties in urban markets, desirable suburbs and coastal communities are selling well,” said Katherine August-deWilde, president and COO of First Republic Bank. “First Republic continues to make jumbo home loans to well- qualified borrowers.” The last half of August-deWilde’s statement is telling; jumbo loans have become much harder to get in California as much of the private-party market that once fueled high-balance ultra-jumbo lending has dried up. For more information, visit http://www.firstrepublic.com.