“Figuring it out.” That could become the theme of Los Angeles’ luxury residential market this year.
Brokers said as much on Thursday, when some of the market’s top agents took the stage to talk about how they’re navigating current headwinds and closing deals. The agents spoke during the “Pushing Luxury Limits” panel that was part of The Real Deal’s LA Real Estate Forum at the Beverly Wilshire.
Panelists were quick to start their talk with the biggest news this year in the rules stemming from the Sitzer-Burnett class action settlement in Missouri federal court. The National Association of Realtors rules, which went into effect Aug. 17, require buyers to sign a representation agreement prior to being shown a property and allow no buyer commission information on the Multiple Listing Service.
Aaron Kirman, CEO of Christie’s International Real Estate Southern California, shared what he has seen on the buy and sell side since Aug. 17.
“When I’m going to listing appointments, every time now, the seller thinks that they don’t have to pay compensation,” Kirman said during the panel.
On the other side of negotiations, Kirman said he has not had a difficult time getting buyers to sign the representation form as long as they believe the seller is paying for commission.
It’s all part of a larger education process taking place, other panelists said.
“You never had to tell people what we did,” Carolwood Estates’ Linda May said of the learning curve for many in the industry as they convey to clients the work that goes into selling and buying a house.
Sally Forster Jones of Compass’ Jones Fridman International & Associates echoed that sentiment.
“On the buyer side, that’s a little more challenging because … it’s all about articulating your value and if you don’t know what your value is, it’s going to be more of a challenge,” she said. “There have always been those buyers who really want a deal. There’s going to be those buyers that still want a deal.”
Measuring Measure ULA
Another education process — perhaps less advanced than NAR’s new rules — involves Measure ULA.
Voters approved the ballot measure instituting a transfer tax on commercial and residential deals within the city of Los Angeles. The tax went into effect in April last year and currently applies a 4 percent tax on transactions of $5.15 million and a 5.5 percent tax on those of $10.3 million or more.
ULA was billed and continues to be referred to as a “mansion tax,” but the panelists underscored how misleading the label is in getting the public to understand the implications of the tax.
“They angled smart; I think it’s a horrible thing,” Kirman said of how the ballot measure was marketed. “But I’ve got to give that guy credit or girl credit for using that term because it got through, but it never should have.”
May pointed out how little has been discussed in the way of Measure ULA’s impact on development.
“We’ve had more people walk off fabulous opportunities on land sales, dirt sales, where a developer turned around and said, ‘I don’t know what my exit’s going to be. I’m taking a pass,’” May said.
When public discourse turns to how much money has been collected from Measure ULA and how those funds are being used, that’s when there’s a chance for change, said Coldwell Banker Realty CEO Kamini Lane.
“I think when we get to the moment in time where the devil is in the details and the public at large actually cares about the details of ULA, that’s when there’s actually a chance,” Lane said. “When there is a conversation about where’s the money going? What is the tradeoff between money generated and money lost for jobs, for housing, for housing availability, I think that’s a moment in time where we can actually have a much more nuanced and forward-thinking conversation.”
Getting deals done
Despite the current challenges, brokers in the luxury space say they’re dealing with different client dynamics. While much has been said about the impact of high interest rates on residential sales, stock market sentiment holds more weight for many high-net-worth clients.
“On the luxury buyer, what’s really much more important to them is what’s going on in the stock market,” Forster Jones said. “Are they feeling wealthy or are they feeling poor?”
Kirman said the emphasis at his brokerage has been a focus on who is actively buying at the moment.
For Christie’s International Real Estate Southern California, about 80 percent of the people buying properties worth $25 million or more have come from China, Taiwan, Singapore and other Asian countries.
In Carolwood’s case, 80 percent of the brokerage’s deals in excess of $20 million this year have come from domestic buyers, May said.
Ultimately, each brokerage’s sphere of reach and focus differs.
“I always say, as real estate agents, we go where the money is,” Kirman said. “And the goal is to get those people before they get to us.”
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