Ultra-wealthy home buyers both in the U.S. and overseas are awake to Los Angeles County’s status as a hub of commerce, technology, entertainment and culture, making it increasingly attractive, according to some of the county’s top residential real estate agents.
Would-be property owners from Asia, Europe and South America have been gobbling up local luxury homes for the past several years.
Now, U.S. buyers from outside L.A. County have stepped up their game, agents said.
“What we’ve seen really change in the last two years dramatically is it’s become a local market – 75 percent of buyers are American,” said Rochelle Maize of the Hollywood-based Nourmand & Associates.
Maize’s $252 million in local sales volume last year was enough to earn her the No. 14 spot on the Business Journal’s list of top residential real estate agents. Each agent is ranked by dollar volume of local sales.
Los Angeles’s reputation for being hubs for entertainment and good weather isn’t exactly news.
What is different is that luxury home buyers have been looking here. By comparison, Manhattan’s real estate sales plunged 25 percent year over year in the first quarter of 2018, their largest drop in six years, according to a report from brokerage Douglas Elliman and appraisal firm Miller Samuel.
Kurt Rappaport, co-founder of Westside Estate Agency in Beverly Hills, said Los Angeles “lacked soul” in the past. Rappaport, who has been the real estate agent for notables such as Dr. Dre and Ellen DeGeneres, was ranked No. 1 on the Business Journal’s list with $733 million in local sales volume.
Tinseltown to Techtown
The market has changed in recent years, with various causes and results. A vibrant base of tech complement has provided an eye-catching sector to complement the traditional buzz of Hollywood. The change includes the emergence of companies such as Space Exploration Technologies Corp., as well as some blends of the tech and entertainment sector, with outfits such as Amazon.com Inc. and Netflix Inc. establishing studios here.
A revitalization of the sports scene here has helped, too, according to Santiago Arana of The Agency of Beverly Hills. Arana was ranked No. 6 on the list with $421 million in local sales volume last year, more than double his 2016 total.
That trend has been pushed along by the arrival in recent years of two professional football teams and the ongoing construction of Los Angeles Stadium at Hollywood Park in Inglewood, the future home of the Los Angeles Rams and Los Angeles Chargers.
Banc of California Stadium in Exposition Park just opened as home to a second professional soccer club in the area. The 2020 Major League Baseball All-Star Game will be played at Dodger Stadium, the 2022 Super Bowl is set for the Inglewood stadium, and the 2028 Summer Olympics will ensure a high profile for Los Angeles on the domestic and international sports maps.
Throw in long-standing benefits such as good weather and world-class museums entertainment options and the equation on Los Angeles has changed for a lot of high-end visitors-turn-buyers.
“People don’t want to come to just visit L.A. anymore,” said Arana of The Agency. “They want to own real estate here.”
Los Angeles remains an expensive place to live for most people. The median sale price of a home in Los Angeles County was $580,000 in February, according to CoreLogic Inc.. The national median home sales price during the first quarter of 2018 was $328,000, according to the Federal Reserve Bank of St. Louis.
Some Southern California cities have more renters than homeowners as middle-income workers are priced out of the market.
Some high-end realtors offer a different perspective.
“If you take L.A. as a city and compare it to other major cities in the world, we’re still relatively cheap,” said James Harris, who along with his colleague, David Parnes, of The Agency of Beverly Hills, was ranked No. 12 on the list.
An example: a luxury penthouse apartment near New York’s Central Park can cost buyers more than $10,000 per square foot while luxe abodes in Los Angeles – often detached residences – average around $3,000 per square foot.
“It still represents incredibly good value compared to New York or Miami,” Parnes said. “Here, you own land for the most part.”
The challenges facing the sector depend on the income level of the homebuyers. The wealthy have more of a cushion to withstand rising interest rates, and tend to not be as dependent on websites run by firms such as Zillow Group Inc. or Redfin when purchasing second or third homes.
“They (such websites) are a big threat in the lower-end sector where the product type is cookie cutter and very comparable to the competition,” said Tyrone McKillen of Hilton & Hyland in Beverly Hills, who was ranked No. 9 on the list.
But technology can only do so much, agents said.
“You’re not going to take away the human element,” said Sally Forster Jones, ranked No. 8, of Beverly Hills-based Compass. “Residential real estate is emotional.”
Other potential headwinds include the new federal tax law limiting the deduction of state and local taxes to $10,000, which will hit high-earners in California, though its effects likely won’t be felt in earnest until next year, according to Stephanie Younger, ranked No. 15, of Compass.