Prices are rising even as foreclosures across the US doubled in July
(SAN FRANCISCO) Luxury home prices continued to rise in some of California’s wealthiest communities, according to a survey by First Republic Bank, even as the state posted the highest number of homes entering foreclosure in decades.
High-end buyers shrugged off a nationwide housing slump, as the average price for a luxury home in Los Angeles in the second quarter rose 4.5 percent from a year ago to US$2.46 million. San Diego prices rose 2.4 per cent to US $2.19 million and San Francisco prices gained 2.3 per cent to US$3 million, according to the survey.
The advances compare with annual increases in the second quarter of 2006 of 12.8 per cent in Los Angeles, 6.4 per cent in San Diego and 4.8 per cent in San Francisco, First Republic, a private bank based in San Francisco, said.
‘Year-over-year, increases are moderating, but overall most of California’s luxury home markets remain active,’ Katherine August-de Wilde, chief operating officer of First Republic, said in a statement. Prices rose ‘because of continued demand, a limited inventory and historically low interest rates’. Stricter lending standards amid a sales slump and price declines in a third of US cities haven’t dampened California’s high-end market, said David Lichtman, chief credit officer at First Republic, whose average loan is about US$1 million.
‘The luxury market is holding up well,’ with buyers paying in cash or financing with large loans, Mr Lichtman said in an interview. The bank had ‘record dollar volumes in loan originations’ in the second quarter, he said.
Across the US, homes facing foreclosure almost doubled in July as property owners with adjustable-rate mortgages saw their payments rise and were unable to refinance because of the sub-prime crisis, data provider RealtyTrac Inc said on Tuesday.
Lenders sent 179,599 notices of default, scheduled auctions or bank repossessions last month, a 93 per cent increase from a year earlier, Irvine, California-based RealtyTrac said on Tuesday in a statement. California, Florida, Michigan, Ohio and Georgia accounted for more than half of the country’s total filings.
‘It’s too soon to tell whether tighter lending standards will lead to price declines at the high end, Mr Lichtman said.
‘It’s business as usual for us. We’re lending to qualified buyers to finance home purchases.’ Brokers say there are ‘generally fewer sales’ Mr Lichtman said.
First Republic tracks prices, not the number of transactions, for a basket of homes in cities including Beverly Hills, Malibu, Santa Monica and La Jolla in Southern California and Hillsborough, Los Altos, Portola and Woodside in Northern California.
The homes in the Los Angeles and San Diego areas cost US$1 million in 1985; those in the San Francisco area cost US$600,000 in 1985.
‘The upper end is doing wonderful, better than ever,’ said broker Benjamin Guilardi of Alain Pinel Realtors in Los Gatos, south of San Francisco. ‘We have an extreme shortage of properties, and we have a very intelligent group of buyers.’
The lower end of the luxury market is experiencing slower sales as buyers wait for prices to fall, said Michele Hall of Coldwell Banker in the Brentwood section of Los Angeles.
‘Anything US$3.5 million and below is struggling a bit. The inventory is staying on the market longer, unless it is extremely well priced,’ Ms Hall said.
Source: Bloomberg (Business Times 23 Aug 07)