The theme of “Figuring it out” seems to capture the essence of Los Angeles' luxury residential market in 2024. Top real estate brokers discussed this at the “Pushing Luxury Limits” panel during The Real Deal’s LA Real Estate Forum at the Beverly Wilshire, addressing how they are navigating current challenges and closing deals.
New NAR Rules Shake Up the Market
A key topic at the panel was the impact of the new National Association of REALTORS® (NAR) rules, effective August 17, following the Sitzer-Burnett class action settlement in Missouri federal court. These rules mandate that buyers sign a representation agreement before viewing properties and prohibit buyer commission details from appearing on the Multiple Listing Service (MLS).
Aaron Kirman, CEO of Christie’s International Real Estate Southern California, shared his insights on the changes. “When I’m going to listing appointments, every time now, the seller thinks that they don’t have to pay compensation,” he noted. Despite this, Kirman has found it relatively easy to get buyers to sign representation forms as long as they believe the seller is covering the commission.
Education is Key in Today’s Market
This shift marks a larger educational process for both buyers and sellers. Linda May from Carolwood Estates highlighted the need to educate clients about the intricacies of selling and buying homes. “You never had to tell people what we did,” May explained. Sally Forster Jones of Compass’ Jones Fridman International & Associates added that on the buyer side, articulating value is crucial, especially when buyers are hunting for deals.
Understanding Measure ULA
Measure ULA, which imposes a transfer tax on commercial and residential transactions over certain thresholds in Los Angeles, was another significant topic. Often referred to as the "mansion tax," the measure applies a 4% tax on transactions above $5.15 million and a 5.5% tax on those exceeding $10.3 million.
Panelists argued that the term "mansion tax" is misleading and complicates public understanding of the tax's impact. "They angled smart," Kirman stated, criticizing the marketing of the measure. Linda May pointed out its effects on development, noting that developers are increasingly walking away from promising land deals due to uncertainties about future exits.
Market Sentiment and Buyer Dynamics
Despite these challenges, brokers are adapting to new client dynamics. While high interest rates have affected residential sales, luxury buyers are more concerned with stock market performance. “On the luxury buyer, what’s really much more important to them is what’s going on in the stock market,” said Forster Jones.
At Christie’s International Real Estate Southern California, about 80% of buyers for properties worth $25 million or more are from Asian countries, while Carolwood's deals over $20 million are dominated by domestic buyers.
Conclusion
Los Angeles' luxury real estate market is navigating uncharted waters with new rules, taxes, and shifting buyer dynamics.
As Aaron Kirman succinctly put it, "As real estate agents, we go where the money is, and the goal is to get those people before they get to us."By understanding these evolving market conditions and adapting strategies, brokers continue to push the limits of luxury real estate in Los Angeles.
