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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.

Scroll to see more of this property!

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.


The Big Story

July sees a huge mortgage rate drop and more inventory on the market

Quick Take:

• In July, the average 30-year mortgage rate declined significantly, by 0.50%, positively affecting affordability. Economists predict that mortgage rates have already seen their peak this year, near 6%, and will stabilize around the current rate of about 5%.

• Homebuyers had more inventory to choose from than this time last year, which indicates that the market is becoming healthier. 

• The economy feels uneasy, but the housing market isn’t showing signs of a major reversal.



Home prices continue to reach new highs even as demand declines

Home prices generally stagnate this time of year, so it’s more challenging to ascribe causation for why price growth has decelerated nationally to economic factors — inflation, mortgage rates, supply shortages, and looming recession — when they coincide with long-term seasonal trends. Historically, prices increase in the first half of the year and flatten in the back half. Prices in 2020 bucked this trend, increasing through October before flattening in the last quarter of the year. Although prices rose much higher in 2021, the historical trend returned. This year has, of course, come with different economic and psychological drivers than 2020 and 2021, especially in the housing market. 

For many, if not most of us, the pandemic brought us largely inside our homes, increasing the desire for larger, nicer private spaces. The mass movement to remote work meant that proximity to an office, usually a primary selling point in major metro areas, mattered less or not at all. Many of us experienced our home spaces, work spaces, and communal spaces becoming one, and realized that the home we usually spent little time in would simply no longer work for us. This need for a bigger space, combined with extremely low-rate financing, a substantial increase in disposable income, and more time to look for a new home created a boom in demand in an already undersupplied housing market. As a result, the median sale price rose higher and faster than any other point in history, up 36% over the past two years according to data provided by the U.S. Department of Housing and Urban Development. For reference, in the eight years preceding 2020, the median home price rose a total of 38%. 

As we know, housing isn’t the only asset to rise since 2020. Nearly everything has become more expensive, and inflation (CPI)*, which has rarely ever risen above 5%, ticked above that mark in the summer of 2021 and has only increased since then. The Federal Reserve, which has a dual mandate of price stability and maximum employment, has one major tool: raising the federal funds rate†. By doing so, the Fed indirectly affects the debt markets, thereby increasing other interest rates, such as mortgage rates. 

In the first half of this year, the average 30-year mortgage rate rose nearly 3%. It’s hard to overstate how significantly that rate increase affects affordability. To hopefully simplify the explanation, we will use a $1 million home that is fully financed for illustrative purposes. For a $1 million home, a 3% increase in interest rates raises the monthly mortgage cost by 42%. It’s fairly safe to say that income hasn’t risen by 42% for most people, which means that many potential buyers are priced out of buying homes, softening demand. For those potential buyers waiting for a correction of the residential real estate market, home prices would have to decline by 30% for the monthly costs to be equivalent — that is, $700,000 at 6% is the equivalent monthly mortgage cost of $1 million at 3%. If the housing market experienced such a large correction, there would likely be much larger concerns in the global economy than home prices. Barring a collapse of the entire financial system, supply would simply be too low for a major correction. Luckily for potential homebuyers, mortgage rates dropped by 0.50% in July, and many economists predict that the mortgage rates will flatten out around 5% even as the Fed continues to raise the federal funds rate. This is partially because the market largely understands and has already accounted for the Fed’s rate hike path, which will continue until inflation begins to meaningfully decline and recession worries wane. 

The economy has felt a little uneasy lately — a classic “will they, won’t they?” when it comes to the recession — but for now, we aren’t technically in a recession because job numbers are too good. Demand for homes has clearly softened, which is fine in a severely unbalanced market. We will likely see less significant price appreciation in the second half of the year due to seasonal norms and higher mortgage rates. The market remains competitive and homes are selling quickly. However, buyers are seeing more inventory than last year, which is good for the market. 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:

• Like the rest of the country, home prices in Southern California have hit a ceiling after two years of substantial growth, up a total of 29% for single-family homes and 33% for condos.  

• Demand for homes is clearly softening as sales decline despite more inventory.  

• New listings declined in July, a seasonal norm, which means that inventory in 2022 will likely peak at historically low levels.



Is the market balancing? Tentatively, maybe!

Median single-family home and condo prices declined month-over-month but still remain higher than last year across counties and dwelling types. These price movements are within the bounds of normal price variability, but after large price gains, it feels like any downward movement signals a market correction. As mentioned in the Big Story, prices tend to stagnate in the summer and fall months when inventory is at its highest, so we aren’t ringing the alarm bells quite yet. Homes over the past five years have become less affordable, yet demand boomed. With 30-year mortgage rates potentially settling around 5%, fewer potential buyers will participate in the market than they did last year when mortgage rates were at all-time lows.

Supply is still historically low, which will protect prices from experiencing a major downturn. Prices will likely follow a similar trend as last year, holding relatively steady through the summer and fall months. If you’re following home prices closely, as we tend to do, you don’t need to worry about losing equity in your home, or softening demand, or even an official recession — so long as it doesn’t affect your job. The housing market remains incredibly strong in Southern California.

Sales slowdown

Southern California’s housing inventory continued to rise in July, following historical seasonal trends. Inventory tends to peak in July, which appears to be the case this year. The number of homes for sale has trended lower over the past three years and settled at historically low levels. There were over 13,000 fewer homes on the market in July 2022 than in July 2020. Although 2022 has had one of the lowest inventories on record, we were pleased to see that inventory has increased every month so far. With the substantial drop in sales and new listings, down 20% and 16%, respectively, from June to July 2022, the peak inventory levels for 2022 will undoubtedly be the lowest on record.

The decline in sales, despite rising inventory, indicates that demand is softening. We aren’t saying that demand is low, but it’s trending closer to balanced between buyers and sellers than we’ve seen in years.

Months of Supply Inventory inches toward a more balanced 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 around 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). Notably, single-family home MSI has climbed significantly over the past four months, reaching three months or more for Los Angeles, Riverside, and San Diego for the first time since May 2020, which was an anomalous month due to the early days of the pandemic. One data point does not make a trend, but we are watching closely.


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

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.

Scroll to see more of this dynamic unit!

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.

Scroll to see more of this stunning unit!

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 

To get in contact with us, click here.

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!

Scroll down for a tour of this outstanding property!

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 

To get in contact with us, click here.

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.

Keep scrolling for a tour of this property!

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.

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! 

Keep scrolling to see more of this property!

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

You may be reading headlines and hearing talk about a potential housing bubble or a crash, but it’s important to understand that the data and expert opinions tell a different story. A recent survey from Pulsenomics asked over one hundred housing market experts and real estate economists if they believe the housing market is in a bubble. The results indicate most experts don’t think that’s the case (see graph below):

Two Reasons Why Today’s Housing Market Isn’t a Bubble | MyKCM
As the graph shows, a strong majority (60%) said the real estate market is not currently in a bubble. In the same survey, experts give the following reasons why this isn’t like 2008:

If you’re concerned a crash may be coming, here’s a deep dive into those two key factors that should help ease your concerns.

1. Low Housing Inventory Is Causing Home Prices To Rise

The supply of homes available for sale needed to sustain a normal real estate market is approximately six months. Anything more than that is an overabundance and will causes prices to depreciate. Anything less than that is a shortage and will lead to continued price appreciation.

As the graph below shows, there were too many homes for sale from 2007 to 2010 (many of which were short sales and foreclosures), and that caused prices to tumble. Today, there’s still a shortage of inventory, which is causing ongoing home price appreciation (see graph below):

Inventory is nothing like the last time. Prices are rising because there’s a healthy demand for homeownership at the same time there’s a limited supply of homes for sale. Odeta Kushi, Deputy Chief Economist at First American, explains:

“The fundamentals driving house price growth in the U.S. remain intact. . . . The demand for homes continues to exceed the supply of homes for sale, which is keeping house price growth high.”

2. Mortgage Lending Standards Today Are Nothing Like the Last Time

During the housing bubble, it was much easier to get a mortgage than it is today. Here’s a graph showing the mortgage volume issued to purchasers with a credit score less than 620 during the housing boom, and the subsequent volume in the years after:

Two Reasons Why Today’s Housing Market Isn’t a Bubble | MyKCM

This graph helps show one element of why mortgage standards are nothing like they were the last time. Purchasers who acquired a mortgage over the last decade are much more qualified than they were in the years leading up to the crash. Realtor.com notes:

. . . Lenders are giving mortgages only to the most qualified borrowers. These buyers are less likely to wind up in foreclosure.”

Bottom Line

A majority of experts agree we’re not in a housing bubble. That’s because home price growth is backed by strong housing market fundamentals and lending standards are much tighter today. If you have questions, let’s connect to discuss why today’s housing market is nothing like 2008.


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