Increases in Luxury Home Values Slowed in First Quarter of 2006

SAN FRANCISCO, May 24 /PRNewswire-FirstCall/ -- For the second consecutive quarter, luxury home values posted small gains in Los Angeles, San Diego and San Francisco in the first quarter of 2006, according to the First Republic Prestige Home Index(TM) by First Republic Bank , one of California's leading providers of full-service banking, investment management, and trust services.

The Index, which has tracked luxury homes since 1985, found: -- Los Angeles values rose 0.1% from the fourth quarter of 2005 to the first quarter of 2006 and rose 12.4% from a year ago. The average luxury home in Los Angeles is now a record $2.29 million, up $253,000 from a year ago. -- San Diego values rose 0.9% from the fourth quarter of 2005 to the first quarter of 2006 and were up 6.8% from a year ago. The average luxury home in San Diego is now a record $2.1 million, up $133,000 from a year ago. -- San Francisco Bay Area values rose 1.6% from the fourth quarter of 2005 to the first quarter of 2006 and gained 8.6% from a year ago. The average luxury home in San Francisco is now a record $2.92 million, up $231,456 from a year ago.

"In the first quarter of 2006, the value of luxury homes rose modestly in Los Angeles, San Diego and San Francisco as mortgage interest rates continued to rise," said Katherine August-deWilde, Chief Operating Officer of First Republic Bank. "While the rate of appreciation has slowed considerably from a year ago, the housing market is still strong in all of California's major metropolitan markets."

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/.

Los Angeles Area Values

In Los Angeles, the pace of appreciation has slowed markedly. Values rose just 0.1% in the first quarter and 0.7% in the fourth quarter of 2005, after rising 8.6% in the third quarter of 2005.

Despite the slowdown, certain segments of the luxury market remain strong.

In Los Angeles, Steve Frankel of Coldwell Banker Previews Estate Division in Beverly Hills said the market for the most expensive homes in marquee locations remains in demand, but the market has slowed for properties between $1.5 million and $3 million as mortgage rates edged upward.

In Ventura County, Whit Prouty of Prudential California Realty in Sherman Oaks agreed that the lower end of the luxury market has slowed due to rising interest rates, but it still very active overall. "In the second quarter, we've started to see a typical increase in business -- just like we do every year. It's still a good market."

In Orange Country, Randy Kershaw of Rogers Realty in Corona del Mar says buyers have more choices because the inventory has increased. "We have not seen prices start to go down," Kershaw said. "We've seen reductions in asking prices for properties that were overpriced to begin with. This is a more normal, solid market. There doesn't seem to be anything on the immediate horizon to indicate that prices will soften in this particular market."

San Diego Area Values

In San Diego, where luxury home prices have doubled in the past five years, values rose just 0.9% in the first quarter and 0.7% in the fourth quarter of 2005.

Agents said the market is returning to a more balanced state after a prolonged period of rapid appreciation. "It's just a normal, solid market after several years of somewhat frantic buying," said Bonnie Adams of Coldwell Banker in La Jolla. "We are seeing price reductions for properties that sit, but good properties are selling quickly." There are a growing number of homes in the $2 million to $3 million range, but there are also an adequate number of buyers, Adams said. She expects values to rise 5% to 10% in 2006 if interest rates stay the same or move slightly higher.

In Rancho Santa Fe, buyers are taking more time to make offers, and some sellers are reducing prices as inventory begins to grow. Despite that, the region remains very attractive to affluent individuals and families. "If you had a lot of money, where in the world would you invest it and still feel safe?" said Chuck Gifford of Coldwell Banker in Rancho Santa Fe. "You'd put it California real estate, and in particular, Southern California real estate."

Agent Cutter Clotfelter of Coldwell Banker in Santa Fee agrees that buyers are more discriminating, particularly about homes priced above $4 million. "Buyers are very prudent, they've done a lot of shopping, and they're taking their time. If they do make an offer, it is usually 5% to 10% below the asking price. Buyers have a lot of negotiating power. We're switching over to a buyers' market."

San Francisco Bay Area Values

In the San Francisco Bay Area, the market is still showing signs of strength. Luxury home values rose 1.6% in first quarter of 2006, 1% in the fourth quarter of 2005, and 1.8% in the third quarter of 2005.

David Papale of Ritchie Hallanan in San Francisco said that despite the relatively flat market, demand continues to outstrip supply in certain segments of the luxury market. "Between $1.5 million and $2.5 million, there simply isn't enough inventory. The offers are competitive, and in some instances, they are still going over the asking price. Above $5 million, the market is warm, but no longer red hot." Papale said that many sellers are now pricing their properties more realistically because the frantic pace of buying has subsided.

Joel Goodrich of TRI Coldwell in San Francisco agreed that the market started to soften in the fourth quarter of 2005. "The market is looking for direction. In San Francisco, we're somewhat correlated to the stock market, and it has been a choppy year. I don't see much movement in luxury home prices one way or another for 2006."

In the Wine Country, Felice Torri of Frank Allen Howard in Sonoma said buying activity has picked up after a slow start. "We definitely saw a slowdown in January, but we are seeing activity as long as the homes are well priced. This isn't a declining market as much as it is a stabilizing market. I think values will go up just a bit from where they are this year."

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 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 March 31, 2006, the Bank and its subsidiaries had total Bank assets and other managed assets of $29.0 billion. First Republic Bank provides access to its services online and through offices in 10 major metropolitan areas: San Francisco, Los Angeles, Santa Barbara, Newport Beach, San Diego, Las Vegas, Boston, Portland, Oregon, Seattle and New York City. More information is available on First Republic's website at http://www.firstrepublic.com/.