Luxury home values notched modest gains in the San Diego region in the quarter ended Sept. 30 compared to the second quarter, but were down nearly 4 percent from a year ago, according to an index released Monday by First Republic Bank.
San Diego area values increased 1.1 percent from the second quarter and fell 3.9 percent year-over-year. The average luxury home in San Diego is now $1.63 million, according to the First Republic Prestige Home Index.
In the Los Angeles area, values rose 0.7 percent from the second quarter of 2011 and increased 2.5 percent from the third quarter a year ago. The average luxury home in Los Angeles is now $2.01 million, according to the index.
Bay Area values climbed 1 percent from the second quarter and declined 1.4 percent from a year ago. The average luxury home in San Francisco is now $2.53 million.
"Luxury home prices in many California communities increased due to low inventories, low interest rates and home prices that have declined over the past few years. This has improved the economics of investing in residential real estate," said Katherine August-deWilde, president and chief operating officer of First Republic Bank.
"All three major metropolitan areas in California experienced gains in home prices in the third quarter, which is the first time that has occurred since the fourth quarter of 2010," she said.
San Diego prices turned positive again after declining in the first half of 2011, according to the index.
Despite the modest quarterly increase, luxury home prices remain soft, and many buyers remain uncertain.
"We are very busy, but every single deal is a major struggle," said Lucy Kelts of Prudential California Realty in Rancho Santa Fe. "You have to talk realistically with sellers up-front. We're not going to get out of this mess until the jobless rate goes down by half."
Greg Noonan of Prudential California Realty in La Jolla said the lower end of the luxury market was picking up.
"I'm seeing a bit of pent-up demand in the $1.5 million to $3 million range. At $4 million and above, it is a fairly soft market. Buyers are being extremely aggressive in their thinking about price. If a property is on the market for $4 million, buyers want to pay $3.5 million to build in some downside protection."
The First Republic Prestige Home Index measures changes in homes valued at more than $1 million in key California urban markets. Common features of luxury homes in the index include 3,000 to 6,000 square feet and three to six bedrooms and bathrooms.
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.