What happens when you put three high-end brokers (two of which are on reality television) and two C-suite executives in a room together? Apparently some fashionable outfits, a lot of shop talk and, of course, some jabs.
The residential real estate market took center stage at The Real Deal’s DTLA Spotlight Showcase and Forum at One California Plaza on Wednesday, where panelists weighed in on how L.A.’s reputation for “surf in the a.m. and snow in the afternoon” has helped it become an internationally recognized — and expensive — city, and what the future may bring to the housing market.
Much of the aspirational pricing that the Los Angeles market is experiencing lately — which includes a swath of listings of more than $100 million apiece in Malibu and other wealthy enclaves — is a result of the “development spectacle,” said one of the panelists, Ernie Carswell, a broker at Douglas Elliman.
There are currently 40 spec homes on the market, said Josh Flagg, a Rodeo Realty broker who’s also a star of Bravo’s “Million Dollar Listing.”
“Pricing artificially high gets attention, but it really hurts the fairly priced developments,” Carswell said. “What I would like to see is more reality in the pricing.”
Carswell later revealed the “secret sauce” he tells sellers: “Ask less and you will get more.”
When Alexei Barrionuevo, TRD’s Los Angeles managing editor and moderator, asked about L.A.’s ranking compared to other prime markets, such as London and New York, James Harris, a broker at The Agency whose motto is “British style, American drive,” argued L.A. isn’t nearly as expensive as other cities.
Josh Flagg, Nick Segal, Beth Styne, Alexei Barrionuevo, James Harris and Ernie Carswell
“L.A. always seemed to be behind those prime markets,” the “Million Dollar Listing” broker said of his hometown, London. “We’re still relatively cheap compared to other cities around the world on a price per square foot basis.”
Nile Niami’s $500 million spec home, Petra Ecclestone’s recent price reduction at the Spelling Manor and Bruce Makowsky’s $188 million spec were among some of the homes mentioned.
The city’s growing prestige has led to new technology aimed at attracting buyers from all over the world to the most exclusive of listings. That demand for greater exclusivity has spawned “pocket listing” services like ThePLS.com and Private View.
Pacific Union International recently launched Private View, a listing platform for Pacific Union brokers and the public to view authenticated pocket listings before they hit the Multiple Listing Service. The firm has seen 20 percent of its listing inventory sell off-market, said Nick Segal, the firm’s president and a panelist.
Harris countered that the pocket listing service he co-founded at The Agency a year ago offered more exclusivity than Pacific Union’s platform because it only allows registered agents to view pocket listings from around the world.
The rise in such platforms shows that the public has lost faith in the way brokers have been selling real estate, Carswell said. “It’s an answer to Zillow,” Segal said of the growing public platform that has started to become a pain point for brokers. “We are trying to make brokers more interesting.”
“We must take our market back,” Segal said. Otherwise, “we are going to become irrelevant.”
The panelists acknowledged a broad concern among traditional brokers in L.A. that technology-focused firms like Compass and Zillow, are driving down commissions. Still, the consensus was that agents should take all listings, even those below the standard 2.5 percent.
“One successful transaction at any price point will turn into five in the course of 12 months,” counseled Beth Styne, a regional executive at Coldwell Banker.
Despite their differences, the panelists all agreed on a dark prediction: that a correction in the economy is looming.
Styne said price reductions are “the first sign that the economy is starting to shift.” It’s especially troubling to see sellers and banks accepting stock options and cryptocurrency, as volatile as they are, as accepted forms of payment, she said.
One team within Compass working in Silicon Beach saw buyers use stock-option cash to help fund their purchases in about 15 percent of their 168 sales in 2017, TRD previously reported. Among buyers 35 or younger, more than half tapped option funds, according to Stephanie Younger, the Compass agent who leads the team.
Carswell, a veteran broker who said he has seen four real estate cycles during his tenure, said he remembers when Beverly Hills dropped 40 percent in one year.
“Were they crashes or setbacks?” Flagg asked.
Carswell shot a glance at Flagg, who is 32 years old. “It was probably before you were born,” Carswell said. “But they were crashes.”