But not everyone. The high end is hopping.
Luxury home prices in Los Angeles continued to soar in the third quarter, posting five straight quarters of double-digit gains, boosted by low interest rates and tight inventory, according to a survey by First Republic Bank.
Luxury home sales in Southern California are hitting levels not seen in decades. The number of homes bought for $2 million or more in recent months is the highest on record. Sales worth $10 million or more are on pace this year to double their number from the heights of the housing bubble.
The value of luxury homes (or homes valued at more than $1 million) in the Los Angeles area jumped 13 percent from the third quarter a year ago and 3.7 percent from the second quarter. The average price for a luxury home in the area hit an all-time high of $2.61 million. The third quarter was strong across most markets from West L.A. to Malibu, prices are very strong and buyer interest is greatest for homes selling for $2 million to $5 million
Low interest rates, a strong stock market and waves of cash sloshing in from overseas are boosting demand for high-dollar homes. A record 1,436 homes worth $2 million or more were sold in the six-county Southland in the second quarter, according to CoreLogic DataQuick.
The biggest difference in the luxury market between now and a decade ago is that the world is smaller. Wealthy international buyers are scooping up second homes, investment properties and safe havens for their cash. And it’s easier for them to scout — and travel — the world to do so.
The Southland scores points with these buyers for its weather, its glamour and a population diverse enough that nearly any transplant can feel at home. And despite its reputation as one of the nation’s least-affordable housing markets, Los Angeles can look like a steal compared with other high-end havens. Private wealth managers around the world think California is a very good market right now, compared to New York or London, L.A. real estate is a bargain.”
But it’s not just foreign money that’s heating up the high end.
A surging stock market has boosted portfolios for domestic buyers in recent years, especially for those who have money to invest. Low interest rates have made mortgages cheap. And banks — still risk-averse — are offering lower rates and better terms to deep-pocketed borrowers than to cash-strapped first-time buyers. Meanwhile, wealthier households have seen their incomes grow faster than average in recent years.
High-end home sales are surging in “Silicon Beach,” too, with tech entrepreneurs and Bay Area transplants scooping up multimillion-dollar homes in Santa Monica, Venice and Marina del Rey. Many of the buyers work in the area and prefer walkable neighborhoods, relatively close to work, to the traditional hubs of Westside glitz.
Then there’s the formerly sleepy South Bay. The average sales price in Manhattan Beach through the first nine months of the year topped $2.2 million. That’s up from $1.85 million in the same period last year. Even empty lots in the beach town’s “Tree Section” are going for $1.3 million. Prices have been climbing so fast that even fairly recent buyers say they’re lucky they got in when they did.
Young professionals have played a big part in the South Bay’s surge, along with those in the tech industry who prefer a more laid-back scene than Santa Monica and a growing cadre of professional athletes. Then there are young buyers who walk in with trust funds or family money. A lot of folks in their 20s and 30s are coming in and claiming properties at $3 million or $4 million, sometimes all-cash.
Luxury buyers are trending younger. Tech entrepreneurs and other wealthy shoppers in their 20s and 30s are gradually replacing baby boomers, who often weren’t as young when they earned enough to afford a big-ticket house. They’re looking for different kinds of homes — often with more outdoor space — and in different neighborhoods. And, we predict, they’ll be driving up the high end of the market for a long time.