From left: Michael Williamson, Eric Lavey, Michael Okun, Shen Schulz, Michael Bell
Malibu. Beverly Hills. Santa Monica. Like Hollywood celebrities, Los Angeles’ most enviable addresses need no introduction. And because high-end properties are so coveted, real estate prices continue to vault ever higher, once again hitting double-digit increases in 2021. Those looking to buy or sell luxury homes realize they are best served by an accomplished professional in this vibrant market, which is why they turn to trusted agents from Sotheby’s International Realty.
Sotheby’s International Realty with its comprehensive footprint, augmented by the recent acquisition of four new offices in Calabasas, Encino, Toluca Lake and Sherman Oaks has broadened the Sotheby’s International Realty, Inc. presence in Greater Los Angeles and Santa Barbara to 18 offices with over 680 agents.
Sotheby’s International Realty – Beverly Hills agent Eric Lavey has recognized a noticeable uptick in people heading to L.A. from both inside and outside the state. “They’re coming here for the lifestyle that is undeniably second to none,” he says.
The draw is no surprise to Shen Schulz, a Sotheby’s International Realty agent in Malibu who’s been in the real estate business for more than 20 years.
Everyone feels better in nature, and we are seeing consumers are making location a priority. Since real estate tends to always increase in value, it’s an even bigger lure because these properties are a valuable commodity they can enjoy today.
Key Market Forces Keep Prices High
The pandemic ushered in the craziest housing market veteran agents have ever seen. Michael Okun of Sotheby’s International Realty Sherman Oaks brokerage, who has nearly two decades of expertise, marvels at the fact that there is currently less than a one-month supply of homes. “Four to six months is what’s considered an even balance, and we are hovering at a two-to-three week supply.”
Buyers should buckle up: It’s not likely to improve any time soon. Okun believes this demand is driven largely by the move toward virtual and hybrid work environments that have redefined people’s sense of place. “Home is now a live/work space for many, who will pay a premium for spaces that can accommodate their needs. Also, since commuting is no longer an issue, proximity to work is not the driving factor it once was.”
Couple that trend with a booming stock market and an imbalance between supply and demand, and the records set in 2021 are not likely to abate in 2022.
Another key reason for the lack of inventory is that people are staying in their homes longer, observes Michael Williamson, Executive Vice President and Southern California Regional Manager for Sotheby’s International Realty. “They’re giving it to family or keeping it as a second home,” he says. “While people used to be inclined to move or even downsize, now they tend to pull out their equity instead. Until that pattern changes, inventory won’t shake loose.”
Furthermore, with fewer houses to buy, potential sellers are staying put, further squeezing inventory.
The great properties seem to defy gravity, says Michael Bell of Sotheby’s International Realty Pasadena Brokerage, who has been in the real estate industry for 23 years. Their lofty prices are a result of current low inventory, perceived continued low inventory and the fact that buyers are taking the long view of real estate.
Multiple Offers are the Norm
There’s nothing more disheartening than finding the ideal property, only to lose it during a bidding war. Unfortunately, the slim inventory contributes to this situation, and interestingly, the rapidly increasing prices aren’t the deterrent one might assume.
“With a seemingly unlimited checkbook, you’d think it would be easy to find the house of your dreams, but there aren’t a lot of special properties, even in the $10 to 15 million range,” Lavey notes.
Dealing with rattled clients requires a solid understanding of the market, not to mention patience and empathy. Schulz draws on his recent experience buying a home himself and recommends focusing on the math, rather than the emotion. “I like to reframe the money conversation by talking about what a higher purchase price really means,” he explains.
“Bidding $100,000 over the asking price can sound like an exorbitant amount, but in rare cases is it coming out of your pocket all at once. In reality it’s a relatively small month-to-month increase in your payment.” And, he adds, would-be buyers are liable to continue running into the same problem, so why not get the property they really love?
As the market continues its competitive streak, Lavey counsels his clients to go to the max to avoid disappointment. “I tell them that if they know they’ll be upset if someone buys it for x amount over their offer, then that’s their price point.”
And when also fails, Okun has soothing words of wisdom: “I remind them their dream home is still out there. If they didn’t get it, it wasn’t meant to be.”
Won’t You Be My Neighbor?
Given the limited inventory and ubiquitous bidding wars, buyers may fret they will never find their home. That’s when agents double down and get creative about where they look, often finding unexpected gems in areas where a buyer might be more competitive.
This migration is leading to a blurring of the lines between neighborhoods. And as consumers expand their perspective on what makes an area appealing, neighborhoods are becoming less “branded” and specialized, drawing a wider variety of shops, cuisines, and amenities that might have previously been concentrated in certain areas. “As prices have gone up and general gentrification has occurred, different areas have become more desirable,” Bell notes.
Williamson finds that where buyers might previously have been adamant about a specific zip code or city, the lack of inventory indicates they may have to expand farther than they thought.
However, one of the challenges can be convincing home buyers to explore these fresh areas. Okun acknowledges it can be a process. “They might be focused on one specific neighborhood, and branching out often evolves gradually as they expand the areas they will consider over time.” Often it’s just a matter of getting them off the computer and into the car to see what’s available. He finds that Westsiders who claimed they would never move to the Valley are pleasantly surprised when they actually scout the area and experience the flavor for themselves.
Another example Bell cites is young buyers who can’t help but make schools a determining factor in where they buy. He points to three cities bordering Pasadena that boast blue ribbon school districts, which means they can command a 20 to 30% premium. Yet older buyers who aren’t looking for schools for their own kids, or families that intend to attend a private school anyway, could prioritize other factors in their hunt.
That’s where agent expertise comes in. As Lavey points out, it pays to know an area in-depth. “Every block isn’t the same. Values change lot to lot by 50%.” For example, he understands the nuances between Brentwood, Pacific Palisades and Beverly Hills, which might appear similar if you’re coming from New York. “But when you live and breathe them, you realize there are very distinct differences,” he says.
To help decipher which atmosphere suits a particular client, he becomes what he calls an incredible profiler – in the best possible way. “Based on our conversations, I can deduce what makes them tick, where they hang out and the vibe they need – even if they can’t articulate it,” he says.
It’s not about showing them a bunch of $15 million homes, but knowing what they are going to like and where.
One of Schulz’s strengths is his in-depth knowledge of Malibu gleaned as a lifelong resident. He shares this intelligence through videos on his website that spotlight 16 micro-neighborhoods.
And sometimes it’s a matter of rethinking what clients need in a house, says Bell. “While the best homes sell quickly and set the market, what is missing from the headlines is that even with low inventory and high demand, there are multiple expired and canceled listings every week,” he says. That means a house with only one bathroom, a minimal backyard or a lot of stairs will usually sit if it isn’t priced correctly, often to a seller’s chagrin. But with strategic upgrades, it could be the perfect property and worth consideration.
The Sotheby’s International Realty Difference
With a significant footprint bolstered by a recent acquisition, helps to broaden Sotheby’s International Realty company-owned presence in Greater Los Angeles and Santa Barbara to 18 offices with over 680 agents to serve home buyers like never before. Okun describes a rare kinship that allows them to ably guide clients, especially as they urge them to consider new neighborhoods. To meet those needs, an agent might connect with a counterpart at another office to avail themselves of someone who can walk a valued client from street to street, pocket to pocket, to find the property that’s right for them.
Williamson, who currently oversees Sotheby’s International Realty’s expanded offices which stretch from the ocean to the Valley, originally joined the firm because of this reputation for excellence. “Sotheby’s International Realty represents stability and instantly raises an agent’s credibility level. It’s a brand that stands behind you and will lead you to the future,” he says. “Clients, particularly those in the luxury market, recognize that its global presence is a differentiator.”
Sotheby’s International Realty’s significant network, including its recent expansion, becomes even more crucial given this migration to new parts of the greater Los Angeles territory. “Agents can tap an existing knowledge base in areas they don’t know as well or they can refer a client to someone they trust,” he says.
To me this is the Sotheby’s International Realty difference: I have never worked for a company where agents have these connections. The number of referrals among them is remarkable.
But this reputational excellence doesn’t stop at their door, as Sotheby’s International Realty agents are sought-after partners from agents outside the firm due to their market knowledge and success. “We are constantly being contacted by other professionals because they know we transact,” Schulz says, adding that the adage of 10% of agents doing 90% of the business is more apt today than ever. “It’s to the clients’ and other agents’ advantage to work with someone in the top 10 in a particular neighborhood.”
And while the pressure can be intense, at the end of the day, Sotheby’s International Realty agents appreciate their opportunity to serve incredible clients. As Williamson says, “Every day is not always roses or daisies, but boy, are we lucky to do what we do.”