Luxury home sales in LA plummet after ULA tax start date

UPDATED MAY 11 at 12:30 p.m.:

During the first month of the Measure ULA transfer tax taking effect, sales of luxury homes in the city of Los Angeles plummeted.

According to a Multiple Listing Service data analysis, there were only two sales for single-family homes in the city above the $5 million tax threshold during  April. This compares to 109 homes in the same price range in the preceding month of March. In April 2022, there were 50 sales.

The sharp drop-off in sales was a jolt to L.A. luxury agents. Stephen Shapiro, co-founder of independent Westside Estate Agency, said that in his 40 years of business, he had never had to deal with a tax as steep as the ULA. It exacts a 4 percent payment on deals between $5 million and $10 million and 5.5 percent on deals above $10 million.

But Shapiro said the sharp decline in sales was not entirely unexpected. 

In March there was a scramble to sell luxury homes before the deadline for the ULA tax, which started April 1. In a market without the tax, a number of March deals would have closed in April, or even May. 

“We had deals with seven- to 10-day escrows to beat ULA. There would not have been seven- to 10-day escrows if there was no ULA,” Shapiro said.

Also contributing to the April slowdown was the general market, Shapiro said. “It’s definitely a slowed-down market. The banking crisis has put a lot of people on hold. People have been taking a lot of time to move money around. They are unsure where they are going to be borrowing.” he explained. 

He forecast less luxury deals for the near future. “Some years are good.  Some years aren’t as good. There are hills and valleys. But after the valley comes the hill,” Shapiro said.

While the transfer tax convinced some sellers and buyers to stay on the sidelines, developers such as Michael Vaknin feel the post-ULA market is as good as any to list a luxury home. On May 4, he and designer Alon Zakoot produced a showing for a trio of luxury homes, nicknamed The Glass Ladies, on the 800 block of California Street in Venice. One of the homes at 840 California Avenue was put on the market for $6.2 million. Another will be placed on the market in late summer for $5.9 million. The third will be priced at $4.9 million, below the tax threshold. 

“We priced it aggressively to sell quickly,” Vaknin said. 

He and Zakoot worked on home pricing with listing agent Sally Forster Jones of Compass. Pricing two of the new, architecturally unique homes above the ULA threshold matches what the Venice market will bear, Vaknin said. Buyers will seek new homes because the West Los Angeles market has for decades dealt with low inventory and high demand. Another reason is continuing interest from deep-pocketed tech executives seeking a unique residence in Los Angeles’ Silicon Beach area. 

High demand will keep Los Angeles’ luxury home market afloat, said Michael Nourmand, president of independent firm Nourmand & Associates. 

“There’s always someone making a lot of money in Los Angeles. If it’s not entertainment, then it is someone with an IPO, or someone who sold a big real estate portfolio. And they’re going to be interested in buying and enjoying a house,” Nourmand said.

Correction: MLS data used for this story was updated to reflect only two sales for homes priced above $5 million took place during April in the City of Los Angeles. Previous analysis for MLS data used in this story did not take into account sales recorded in April were closed in March.

Clarification: Previous story didn’t accurately state the timeline for the three Glass Ladies homes in Venice to come to market.