Luxury home sales recovering after Los Angeles 'mansion tax', says Josh Altman
Yahoo Finance Video
Los Angeles has what many are calling a "mansion tax," an additional tax on properties that sell for $5 million or more. The tax started being imposed on April 1. Josh Altman, Co-founder of The Altman Brothers team tells Yahoo Finance Live that after a slow April, the sale of luxury homes in the city of Los Angeles showed some signs of recovery in May.
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Video Transcript
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SEANA SMITH: As part of our week long series "Real Estate, The New Reality," we're taking a look into the world of the high-end housing market. Luxury homes had a rough start to the year, began with sales in the US seeing a decline of just about 44%. That's according to the latest numbers from Redfin, but where does the high-end real estate market stand now? Here to discuss, we want to bring in the Altman Brothers Team co-founder Josh Altman.
Josh, it's good to see you here. So from those numbers, at least from Redfin, it looks like the luxury market was off to a strong start to the year. Where does it stand today?
JOSH ALTMAN: Well, I can tell you about California as I'm sitting in my car out front of a listing because I got a big showing, which is always a good sign. We are at about 20% down compared to last year of May 2022. In LA County, there was about 4,200 sales total up to this point. This year at about 32%, so we're 20% down with that.
But I will tell you the biggest question, of course, was the ULA measure that was passed. Good news is that even though we had an extremely slow April, May has doubled and June is looking like it's going to double that. In April of this year, properties over $5 million in the ULA measure areas, which is that new tax that was passed, there was only about 10 sales that month, which was extremely slow.
And then the next month afterwards, we had about 20. And it looks like we're going to have about 30 sales now in the ULA area. So listen, we're all super hopeful about it. That's what I can say here over in Los Angeles.
DIANE KING HALL: So we've definitely seen some of that pressure here on the East Coast as well, Josh. Diane here right now. So you're seeing that dramatic impact to luxury real estate on whether you're talking about California or New York. Speaking specifically to California, is there-- what is happening to pricing as a result of this drop in demand for luxury real estate?
JOSH ALTMAN: Well, look, I mean, of course, across the board, the buyer mentality is all about a deal these days. But with everything continuing to move which is good, believe it or not, May was our strongest month with closings. So that actually shows that our next very strong month is probably going to be somewhere around July. Because if you look at the most openings, which were in March, it's all, kind of, in line here two months afterwards. So that's all good stuff as well.
As far as the inventory, yeah, we have a good amount of inventory. Good houses still are selling. There's good competition in the lower price points, which in LA, of course, are that million, 2 million range. Things are still moving in that very strong. So look, even though, of course, there's a lot of not great stuff being told about California, LA real estate, I'm feeling pretty good about now considering.
SEANA SMITH: Josh, who had the upper hand then at this point? Is it the buyer or is it the seller? It seems like it's tough to figure out.
JOSH ALTMAN: Look, yeah, that's a good question. I like to be really cash heavy right now for the next 24 months. I think the buyer has the upper hand. Although I can tell you in any market anywhere, especially with what I deal with, which is the ultra high net worth individuals and the high-end market, you build a great house, you build the trophy, there's always somebody willing to pay for it. So we'll have to see what happens.
DIANE KING HALL: So Josh, speaking of that you building a great house-- and you talked about inventory-- inventory has been an issue in terms of general real estate, not so much in terms of luxury real estate. But it is-- well, I should ask you actually, is inventory an issue for luxury real estate?
JOSH ALTMAN: Well, inventory, it is an issue here in LA County. But my other office in Orange County, actually there's not enough inventory. So it's interesting with just an hour move away and also an extremely strong market out there, in my opinion, very undervalued. There is just complete different outlook as far as the market goes.
So it's really all these micro markets. And you know, some of them, of course, have led all the way back to COVID, which markets like Miami, which have been through the roof ever since. And also, of course, taxes pushing other places, Las Vegas, Arizona, Nashville, Texas, other places like that still very strong, I got to tell you.
SEANA SMITH: Josh, how was the demands or how have they changed from the high-end buyer here just in terms of what they're looking for, what their preferences are at this point? Is it different post-pandemic than what we were looking at four or five years ago?
JOSH ALTMAN: Yeah, that's actually a pretty good question. Before it was location, location, location. Now it's walking location, walking location, walking location. That's what we're seeing out here.
Everybody wants to just be in the mix. Because if they are going to have their everyday life, they want to have the ease of just in case anything happens again, they want to be close to everything. And so that's really what's driving the market here.
Also, look, styles change, of course. What we're seeing here-- seeing here out in LA is the earthy tones are just killing it now. Everybody likes the very simple stuff, no more shiny stuff. That had a trend about five years ago, which thankfully is done now. But yeah, you know, different neighborhoods, of course, have gone up and down. But here, where our office is in Beverly Hills, continue to be strong, but mostly I will tell you because we are not affected by that ULA measure that was passed in most of LA County.
DIANE KING HALL: Josh, I want to ask you about the impact of State Farm Insurance pulling out of California. What is the impact to the luxury real estate market considering State Farm was the biggest home insurance provider in Cali?
JOSH ALTMAN: Yeah, I'm not going to lie, my phone blew up when that went public over the news a couple of weeks ago. It was hard enough as is. So now that they've bowed out, that's going to be a real issue, especially, look, in those heavy fire markets where, of course, you've got to-- you're paying premium for that. Now, that's going to be a major, major blow to those properties.
And because most of them here in California and some of those areas like Mulholland Drive, the famous Mulholland Drive-- try getting fire insurance up and down Mulholland right now, it's near impossible. And yeah, when your fire insurance is double your mortgage payment every month, that's a big issue. That makes-- you're going to see a drastic drop in those markets more than any before.
So I'm glad you brought that up. You know, over time we'll see. We'll see who jumps back in, but it's not good.
DIANE KING HALL: All right, well, that will be certainly a space to watch. Thank you so much for joining us today Altman Brothers Team co-founder Josh Altman.