Over the past few months, Yolanda has noticed a sluggish trend in LA’s real estate market, particularly in the ultra high-end sector — homes worth $10 million and up. Inventory ain’t the problem. Seems like there’s a new $50 million listing every other day! Still, it feels as though an invisible spigot has been corked into our proverbial tap of buyers, reducing sales volume to a trickle.
Then again, this could easily be our imagination. We certainly haven’t done any sort of market research to verify that feeling with hardcore facts.
But luckily, we didn’t have to do our own research on that part. The nice folks over at the Douglas Elliman brokerage recently provided lazy Yolanda with a copy of their Q4 market reports, sporting analysis helpfully prepared by Miller Samuel appraisers. And we thought a brief discussion of the overall findings might interest our readers.
The overarching report summarizes LA’s Q4 results as follows: “Overall price trends moved higher as sales slipped and inventory expanded.” Not that we’re looking for a prize (or a cookie), but that description certainly jibes with Yolanda’s casual observations.
For single-family homes in LA’s luxurious Westside neighborhoods — defined in the report as including Beverly Hills, Brentwood, the Palisades, Malibu, WeHo, Santa Monica and Bel Air — sales dropped sharply, down 19.3% from Q3 and 6.5% year-over-year to 659. Yet prices continued to edge up in, topping a lofty $3.5 million. That overall trend — sales down, prices up — repeated itself in the market’s upper 10%, with the average sales price soaring to nearly $12.6 million but units sold slumping to just 66 for the quarter.
Part of that sales decline can be explained away by Malibu’s Woolsey Fire, which destroyed hundreds of homes in the city and decimated their Q4, with sales down nearly 50% and 20% quarter-over-quarter and year-over-year, respectively. But even in most markets unaffected by the fire — Beverly Hills, Brentwood, Santa Monica — transaction volume was way off.
Though some real estate agents may scoff, Yolanda believes we may have finally crested the peak, people. And if inventory continues to expand and sales remain stagnant or slip further — as we suspect they will — prices will undoubtedly begin to edge downward. Sellers will enter the desperation mode. But we’re not yet in that stage, of course.
Overall, the Elliman report findings aren’t particularly surprising. The real estate market is cyclical and has been on a prolonged, record-breaking nine year upswing. Things just can’t go up forever. But whether the market will merely flatten or nosedive — ala 2008/2009 — is a matter of conjecture at this point. And that’s our 2.5-cent opinion on the matter.