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One might question this notion and it actually holds a little bit of irony. The word “luxury” already gives away that whatever the product is, it is a liability. Luxury, by definition, is expensive, usually a delicacy, elegance or refinement rather than a necessity, so what makes luxury homes a good investment if its purpose is to cater to one’s splendor? 

Before we dive deeper, we must go into the core meaning of “luxury real estate” by today’s standards. 

One misconception is that the price tag is what defines luxury properties, it does not. While the price tag is a significant factor, it is not the only one. There are more factors that constitute a luxury investment house.

Luxury properties are primarily defined by their uniqueness and exclusivity, which raises its value more than the cost of the actual materials used and construction. 

For properties like these, one might also consider location – the residence’s proximity to another luxury home, to the community, and to famous and storied parts of a city all add into the value of a luxury investment. This is the case for trophy addresses such as New York City’s Park Avenue and Los Angeles’ Hollywood. 

The proximity to high-end activities also plays a role, such as how near the home and lot is to shopping districts, fine dining restaurants, museums, etc. The view and environment are factors also. Sometimes, people want views of beautiful landscapes like the lakes, oceans, rivers, and mountains. 

Another key factor that defines luxury properties is their features. Luxury homes contain the same features other homes do, but they do it on a much larger scale. Tighter security to the point of exclusion, custom architecture, interior design, foreign furniture, chef’s kitchen, and many more unique features.

All of these traits are what makes a luxury property luxurious, and it’s all of these too that makes their value skyrocket. The aesthetic of looking rich, of course, comes with a price. That being said, here are the benefits of buying a luxury home:

  1. Involves Less Risk

A luxury property type of investment does not carry as much risk as paper investments especially when investing in the long term. Equity and home prices increase over time because they’re physical assets which is unlike stocks that’s held up by a nebulous force and are prone to dropping its value anytime. 

  1. Assured Capital Growth 

Land and property never decreases in value. Instead there is a steady increase called capital growth. You’re always guaranteed that in real estate. That’s because space is becoming more scarce in the physical world, thus real estate prices rise due to the rarity of land area. 

  1. Rental Opportunities

Luxury investment properties are a prime asset to become luxury rentals. If you own a property with several of the characteristics above, then you’re qualified to liquidate your assets as a rental. There’s a huge market for luxury rentals for lease or for a couple day stays.  

Not only that, your property can also be event venues if it qualifies in that category.

  1. Tax Benefits

Tax benefits for luxury properties could exist in the form of deductions on property taxes, lower mortgage payments and interest rates, and depreciation benefits. 

  1. High Resale Value 

If your home has high-value features such as a desirable location, exclusivity, proximity to entertainment and dining areas, or has an interesting history, you’re going to have a better chance of ROI than other forms of assets. 

  1. Effective Inflation Hedge 

We already know that the value of an investment property increases overtime, and can better keep up with inflation. If your money is tied up with an investment property, your funds are going to grow along with it. It’s only going to continue to rise. This helps investors because their property will never be behind inflation. As the cost of living rises, the value of investment property does, also. 

To put it simply, inflation is a benefit or will not harm luxury property investments.

This striking 1924 Spanish home with an income-producing duplex that’s surrounded by lush and landscaped greens. This property serves as your home and a passive source of income if that’s what you’re aiming for. The garage has also been converted to a guest studio with a kitchenette and bathroom.

Exceptional proximity to prime Melrose Avenue; Urth Caffe, Restoration Hardware, Alfred Coffee, Melrose Place and La Cienega Blvd.

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This 4 beds, 4 baths, 2,927 sqft penthouse condo unit is for sale at $3,295,000

Reach out to us if you’re interested in this property or want to know if you’re qualified to purchase! 

Photo and listing courtesy of Jacob Zacuto | DRE #01377441 | Zacuto Group

And Jane Schore | DRE# 00980877 | Coldwell Banker Realty

To get in contact with us, click here.

To this property’s listing page, click here.

Check out this one-of-a-kind dynamic 2-story top-floor North/East corner penthouse condo with soaring ceilings and private rooftop deck in West Hollywood’s premier neighborhood.

This unique flex-space is currently being used as a 1 bedroom with an extra den/TV Media Room, a separate office, & a loft with its own bathroom. It could easily be converted to a 2 or 3-bedroom condo depending on the buyer’s needs.

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This 2 beds, 3 baths, 1,529 sqft penthouse condo unit is for sale at $1,299,000

Reach out to us if you’re interested in this property or want to know if you’re qualified to purchase! 

Photo and listing courtesy of Allie Joel Riley | DRE #01398467 | Compass

And Michael Collins | DRE# 00963037 | Coldwell Banker Realty

To get in contact with us, click here.

To this property’s listing page, click here.

Landon Pacific’s listing spotlight for this week is this condominium at the Pendry Residences, which is a collection of homes designed to meet discerning eyes and high standards. This unit welcomes you with your own private vestibule as you step out of the elevator. High ceilings and white oak floors lead you to the great room and a gracious size terrace to take in the mesmerizing view of the DTLA skyline and city lights.

The seller loves the building/staff/amenities and hotel access to the Britely, Sun Rose, live music and performance venue, spa, restaurants, and rooftop pool, as well as the proximity to other upscale restaurants and bars.

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This 2 beds, 3 baths, 2,393 sqft home is priced at $4,525,000.

Reach out to us if you’re interested in this property or want to know if you’re qualified to purchase! 

Photo and listing courtesy of Lytel Young  | DRE #01710150 | Corcoran Global Living 

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To this property’s listing page, click here.

Landon Pacific’s listing spotlight is this Hover House 3 situated on the historic Venice Canals of Los Angeles. This was built in 2008, representing the third in architect Glen Irani’s series of Hover Houses which focuses on maximizing outdoor living environments. This is possible by structurally “hovering” the building envelope above the land to create space for outdoor living environments.

This 3 bedroom, 4 bathroom, 2 office, and 3 story home features ground-to-roof canal-facing glass flooding the living space with light and offering show-stopping canal, mountain, and city views from the living areas and secluded rooftop deck.

A property just steps away from the beach, moments from Abbot Kinney, great restaurants, shops, and all the Venice has to offer!

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This single-family home is priced at $4,195,000.

Reach out to us if you’re interested in this property or want to know if you’re qualified to purchase!

Photo and listing courtesy of  Jesse Weinberg  | DRE #01435805 | Jesse Weinberg 

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To this property’s listing page, click here.

Landon Pacific’s listing spotlight is this magnificently remodeled mid-century modern in the famed Bird Streets. This home underwent a meticulous and thoughtful renovation maintaining the architectural integrity of this gem that floats above the Sunset Strip in one of the most desirable locations in the world.

The idyllic atmosphere covered in the most beautiful stones, roman clay covered rooms, herringbone floors and soaring angled ceilings is the ultimate Los Angeles dream home. This home boasts a world of opportunity for the right buyer.

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This single-family estate is priced at $5,690,000.

Reach out to us if you’re interested in this property or want to know if you’re qualified to purchase!

Photo and listing courtesy of  Stefani Schmacker ‘Stolper’ & Kevin Stolper | DRE #01957452 & #02006447 | The Beverly Hills Estates

To get in contact with us, click here.

To this property’s listing page, click here.

Housing experts warn prospecting buyers from further delaying their homeownership plans in hopes of price depletion in this uncertain, economic market.

“Deciding to buy now or wait is going to depend on the individual buyer’s motivation and situation. Waiting may not be a viable option,” says Krista Forsberg, a real estate agent at Keller Williams in Edina, Minnesota. She also adds that even if a buyer can push pause on buying to later in the year or 2023, there isn;t likely to be significant improvements in prices or interest rates. 

Experts say that buyers should be mindful of and keep an eye on the economy because it’s being pulled in all directions by inflation, soaring gas prices, the ongoing war in Ukraine and the pandemic, are a few reasons. In the US, it’s the housing economy that’s being affected by rising interest rates, making it harder to access affordable housing. 

Steve Simmons, founder of October Real Estate in Los Angeles said that he believes that the stark rise in interest rates scare both the buyers and the sellers; they’ve no idea if the rates will stay or continue to increase. This lack of predictability causes many buyers and sellers to sit and wait while there are others who will scramble for a sale or purchase before things get worse. 

That being said, MBA economists don’t see home prices falling in the near future. They report a median sales price of an existing home to be $361,400 in the first quarter going up to $402,000 in the second quarter, and slightly leveling off at $379,000 in the third.

Because of this inflation, high mortgage rates and record-high home prices are making it harder and harder for buyers to afford their mortgage payments. Today, according to Zillow, a typical monthly mortgage payment is 75% higher than it was in June 2019. The frustrating part is that earnings are not keeping up with the inflated costs. Wages grew 6.7% in June, but then fell behind the 9.1% increase in inflation. 

So, the question, when will housing prices start to decrease? We’re not so sure. Since we’re not seeing any decrease in housing costs for new buyers any time soon, our tip for buying a house in a hot housing market is to start off with a budget and stick with it. But even with a slight increase in the number of homes for sale, buyers would still be facing steep prices and mortgage rates in the 6% range. 

There are a lot of factors to consider when buying right now, and a lot of people are scared to make a mistake. Our advice is to go with what your gut says. If the timing feels wrong, then you will always find the wrong home, so wait, But if you feel that this is the right time for that, then you should go ahead with your homeownership plans. 

Landon Pacific’s listing spotlight for this week is this beautiful two-story colonial home, situated in the sought-after San Rafael neighborhood, in a tree-lined street. This home featured 3 bedrooms and 2 bathrooms, spacious living spaces, a luxurious kitchen, and a beautiful backyard.

This picturesque Colonial home is perfect for enjoying premium indoor & outdoor living & taking in the Southern California sunshine! 

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This single-family estate is priced at $1,999,000.

Reach out to us if you’re interested in this property or want to know if you’re qualified to purchase!

Photo and listing courtesy of  Jason Berns & Laura Berns | DRE #01787757 & #01407023 | Keller Williams Realty

To get in contact with us, click here.

To this property’s listing page, click here.

The Big Story

To be, or not to be? That is the recession.

Quick Take:

• The housing market strongly outperformed inflation and stocks in the first half of 2022 and shows no sign of reversing.

• The Fed rate hikes are dampening demand, allowing much-needed inventory to rise, although inventory remains far from the pre-pandemic supply norms.

• The economy is slowing, but a recession may not be guaranteed quite yet. Regardless, housing is poised to hold steady or increase in value.

Rising rates, rising prices, and economic slowdown, but homes still ahead

Economic outlooks seem to change month-to-month, and yet again, we find ourselves in a unique moment in time. The Fed rapidly switched from loose to contractionary monetary policy in March and recently increased the federal funds rate by 0.75% — the biggest increase since 1994. The effects have yet to curb inflation, which is still at a 40-year high (+8.5% CPI year-over-year). On a monthly basis, the Bureau of Labor Statistics (BLS) collects the prices of approximately 94,000 items from a sample of goods and services to calculate the Consumer Price Index (CPI). We didn’t look into everything in the BLS sample, but if you’re like us, it feels like everything we buy is closer to 50–100% higher than it was a year ago, or even several months ago. While prices are rising, the cost to borrow has also gotten more expensive, which is dampening demand. 

We are starting to see this play out in the housing market. We are noticing more inventory coming to market, coupled with fewer sales. We must, however, provide a caveat: The housing inventory is still historically low. As rates rise, especially as rapidly as they have this year, buyers can get priced out of the market quickly and must reconsider their budgets. 

A year ago, the average 30-year mortgage rates hit their lowest levels in history and have more than doubled since then, to 5.81%. Let’s take a look at some numbers to see how assets have performed in the first half of 2022: The S&P 500 declined 21% (the worst first half of the year since 1970), the NASDAQ is down 30%, and Bitcoin and Ethereum have dropped 59% and 71%, respectively. At the same time, U.S. housing prices increased by 15% nationally. Home prices, simply, rarely go down. Even if you weren’t directly affected by the 2006 housing bubble, you likely knew someone who was. One lasting effect of the housing bubble is the perception that home prices decline much like other risk assets, which isn’t the case. Stocks, bonds, and cryptocurrency are fungible assets that allow for large, multiplayer markets. The housing market has only recently become more efficient because of technology, but too many factors play into a home’s value, preventing regular downturns in the market. Large declines in liquid assets do affect demand for homes, though, as people tend to reconsider buying when they feel (and objectively are) less wealthy during dips in those markets.

But what about the Fed’s intention to slow down the economy by decreasing demand through raising rates? Won’t that cause a recession and lower home prices? We’ve already seen some slowdown in the Q1 2022 Real Gross Domestic Product (GDP)* data. The Fed’s goal is to slacken growth enough to curb inflation, but not enough to send the U.S. into a recession, which is a challenging needle to thread. The National Bureau of Economic Research, which officially declares recessions, defines a recession as a significant decline in economic activity spread across the economy that lasts more than a few months and is normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales. With unemployment near all-time lows and a surplus of job openings, we may end up avoiding an official recession, even if GDP decelerates for multiple quarters. U.S. GDP is expected to outpace China’s this year for the first time since 1976, which sounds positive but could be a clear sign of a major slowdown given our economic ties.

Home prices are highly likely to continue rising despite rising rates. If you were waiting for rates to drop, they won’t. The low but rising supply continues to make the market competitive and, as more homes come to market, could mark the early stages of market normalization. As always, we will continue to monitor the housing and economic markets to best guide you in buying or selling your home.

The Local Lowdown

Quick Take:

• Home prices in Southern California may be hitting a soft ceiling after two years of rapid price increases.  

• 2022 began with huge demand in the first quarter, but that demand has slowly dwindled throughout the year. Housing inventory will likely follow the normal seasonal trends; however, the new normal will include historically low inventory. 

• Home price appreciation is moving toward a more sustainable growth rate: around 6–8% annually.

Home prices soften in June

Median single-family home and condo prices declined month-over-month, landing slightly below their all-time highs. After two years of significant price growth, it’s hard not to think that rate increases have caused prices to bump into a ceiling. Without the aid of super low financing options, fewer potential buyers will participate in the market. So far in 2022, the average 30-year mortgage rate has increased over 2.5%, which equates to an approximately 33% increase in monthly mortgage payments. In other words, the new mortgage rate adds $730 per month on a $500,000 30-year fixed mortgage, for example (double that for a $1 million loan). 

Even with the rate hikes, which are only expected to continue this year, home prices aren’t dropping, nor would we expect them to. Supply is still historically low, which will protect prices from experiencing a major downturn. Prices will likely follow a similar trend to last year, with mild growth through the summer and fall months. But, as we mentioned earlier, as rates increase, the same price becomes more expensive, unless you are buying with cash. 

It’s so incredibly easy to get wrapped up in the recent past, during which home prices grew massively. We can’t stress enough how uncommon that price growth was and, most likely, will continue to be. Because homes are not only living spaces but also investments, a steadier growth rate of 6–8% annually is still good for investing purposes.

Sales slowdown

Southern California’s housing inventory continued to rise in June, following historical seasonal trends. Since March 2020, inventory has trended lower and settled at a depressed level. There were over 11,000 fewer single-family homes on the market in June 2022 than in June 2020, and over 3,000 fewer condos. Although the first half of 2022 had one of the lowest inventories on record, we were pleased to see that inventory increased, a trend that usually holds until mid-summer. With June inventory continuing to rise, the next two to three months will likely show us peak inventory levels for 2022, which will likely be the lowest peak inventory on record.

In June, sales declined along with new listings, potentially indicating that demand is softening. This isn’t to say demand is low, however, especially relative to supply. Sellers can expect multiple offers, and buyers should come with competitive offers.

Months of Supply Inventory increasing, but still a sellers’ market

Months of Supply Inventory (MSI) quantifies the supply/demand relationship by measuring how many months it would take for all current homes listed on the market to sell at the current rate of sales. The long-term average MSI is three months in California, which indicates a balanced market. An MSI lower than three indicates that there are more buyers than sellers on the market (meaning it’s a sellers’ market), while a higher MSI indicates there are more sellers than buyers (meaning it’s a buyers’ market). Although MSI has risen over the last three months, single-family home and condo MSIs are still low, indicating a sellers’ market.

Our team is committed to continuing to serve all your real estate needs while incorporating safety protocol to protect all of our loved ones.

In addition, as your local real estate experts, we feel it’s our duty to give you, our valued client, all the information you need to better understand our local real estate market. Whether you’re buying or selling, we want to make sure you have the best, most pertinent information, so we’ve put together this monthly analysis breaking down specifics about the market.

As we all navigate this together, please don’t hesitate to reach out to us with any questions or concerns. We’re here to support you.

– Dominic Pietrangelo, LIC #01860025

Get this striking, extensively remodeled, hedged and gated 1960’s single story Contemporary in prime, North of Sunset, Brentwood location. 

Completed for the current owner by award-winning architects DESIGNARC with open floor plan, clean lines, airy, sun-filled spaces, vaulted ceilings, wood floors, rich wood paneling, walls of glass & French doors throughout.

Keep scrolling for a tour of this property!

This single-family estate is priced at $7,995,000. They’re having an Open House this July 14, Thursday, 11 AM to 2 PM

Reach out to us if you’re interested in this property or want to know if you’re qualified to purchase!

Photo and listing courtesy of  David Offer | DRE #01150357 | Berkshire Hathaway HomeServices California

To get in contact with us, click here

To view this property’s listing page, click here.

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