The First Republic Prestige Home Index for “San Francisco” homes valued at more than $1 million ticked up 1.1 percent from the fourth quarter of 2009 to the first quarter of 2010, down 6.1 percent on a year-over-year basis, down 18 percent from a third quarter 2007 peak, and back to second quarter 2004 levels.
Keep in mind that the “San Francisco” index includes “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.” Whew.
First Republic Prestige Home Index: San Francisco [firstrepublic.com]

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Comments from “Plugged-In” Readers

  1. Posted by The Milkshake of Despair

    The short methodology note for the prestige index does not mention that they filter out non-apples. So what they are really measuring is intrinsic appreciation plus the value of remodels and additions. I might be wrong here though as this part of the statement :
    “For each home in the portfolio, a market evaluation was performed for each time period taking into account repeat sales, comparable sales, and characteristics such as size of house.”
    That’s pretty vague. For example is the house size used to identify apples or as a means to determine whether a home belongs in the prestige index ?

  2. Posted by sfrenegade

    Milkshake, if I remember correctly I believe square footage determines whether a house belongs in the Prestige Index.

    The First Republic Prestige Home Index™ 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.

    http://www.firstrepublic.com/lend/residential/prestigeindex/index.html
    Note that the Prestige Index goes beyond the 5 county area, since the list includes cities in Sonoma, Napa, and Santa Clara Counties, whereas I believe Case-Shiller is normally just Marin, SF, San Mateo, Alameda, and Contra Costa.

  3. Posted by sfrenegade

    Sorry, I dropped something relevant from my blockquote as to why I was explaining 8 counties vs. 5:

    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.

    I was trying to point out that Case-Shiller helps out with the data — through Fiserv Case Shiller Weiss — but that this data set is ultimately different from Case-Shiller SF.

  4. Posted by The Milkshake of Despair

    Thanks sfrenegade. So a 1% increase in the index actually indicates a continued slide since inflation and investment into extensions and remods surely exceed 1%.
    As for the municipalities scanned, it is interesting that they seem to skip Oakland, Berkeley, San Jose, Cupertino, Redwood City, etc. : mostly middle class cities though all certainly contain homes that fit their index criteria. My guess is that they just list a sampling if “prestige towns” though really sample from the whole bay area.

  5. Posted by The Milkshake of Despair

    Du-oh – then I take back my last comment which was being typed in while you added the basis on Fiserv CSW.
    So then it looks as if remod and expansions are *not* included in the prestige index since it is based on C-S data.
    Still, 1% is pretty weak against inflation.

  6. Posted by sfrenegade

    Well, it depends on how closely they use Case-Shiller methodology. My impression is that Case-Shiller attempts to exclude non-apples and also uses an adjustment factor to account for the non-apples that it inadvertently misses. I believe this is done by weighting repeat sales that are farther apart less and weighting close together repeat sales more, but I haven’t read their methodology document in a while.
    But also note that this is a quarterly 1% increase, so that’s 4% annually.
    This quarter’s index is almost identical to 2nd quarter of 2004, and inflation has been more than 15% since then, so real prices have fallen quite a bit even in this elite price range.

  7. Posted by Brahma (incensed renter)

    well, thanks for that clarification, sfrenegade. If they’re going to include for example Alamo, but limit the homes to “3,000 to 6,000 square feet, three to six bedrooms, and three to six bathrooms”, then that leaves out David Duffield’s 10,000 square foot French Norman style mansion in that city. And what kind of a “Prestige Index” would do that?
    Fail.

  8. Posted by sfrenegade

    My guess is that they’re trying to say that most of the homes in the index are in the 3000-6000 sqft range, not that it excludes anything above that range. But I would love to have more detail on their methodology than just those short blurbs.

  9. Posted by Brahma (incensed renter)

    Speaking of short blurbs, on Friday the Wall Street Journal published a story about DataQuick reporting that in some markets, including The City, “sales of homes over $2 million in the first quarter were actually on par with the levels of 2005, the peak year for existing-home sales volume nationwide.” No description of the methodology, either. Here’s the short blurb, wholesale:

    In San Francisco, 49 homes sold for $2 million or more in this year’s first quarter, according to the study, compared to 47 in 2005.

    Tends to back up the “Prestige Index” indication that things on the high-end are up slightly. Interestingly enough, the WSJ illustrates the story with photos of the place in Pacific Heights that sold for $13,500,000, crediting Gregory Malin for the renovation.

  10. Posted by Joshua

    Milkshake,
    Generally agree with your comments, except for inflation. Check the figures, Q1 2010 inflation was very, very low.
    http://www.bls.gov/cpi/cpid1003.pdf

  11. Posted by sfrenegade

    Prestige Index is out for 2nd quarter:
    http://www.firstrepublic.com/lend/residential/prestigeindex/sanfrancisco.html
    6/10 $2,586,671 447.10
    3/10 $2,539,836 439.00
    This is based on Case Shiller data. That’s a 1.8% increase from 1st quarter to 2nd quarter, although still quite a bit below the 3rd quarter 2007 peak.
    [Editor's Note: "San Francisco" Prestige Index Up 1.8% In Second Quarter.]

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