Luxury real estate often follows its own market path, but it has certainly not been immune to the effects of the coronavirus pandemic and accompanying economic downturn. On one end, you have ultra-wealthy sellers paying millions to buy or even rent a secluded property in Malibu or the Hamptons, while, on the other side, some homeowners are frantically trying to sell off vacation homes amid uncertainty over their financial futures.
“All it takes is a few sellers in a particular area that really need to sell or are extremely motivated to sell and sell at lower prices to change the marketplace in a particular area,” said Jordan Cohen, who closed more than $200 million in sales and was named Inman Top Luxury Agent in 2019.
Working in luxury real estate for nearly 30 years, Cohen regularly sells to sports and entertainment stars, and, last summer, closed the deal on a $35 million property belonging to Steelers part-owner Thomas Tull that broke records as the most expensive sale ever to take place in Ventura County, California. This year, however, has left the No. 1 RE/MAX Agent treading entirely uncharted waters. Inman spoke with Cohen to get his thoughts on what’s in store for the luxury market in the coming weeks and months.
Inman: How do you start your days as a luxury agent in the Los Angeles area? Has your routine changed due to the pandemic?
JC: There was about a three-week pause in which I was just on the phone, talking to clients and keeping people informed. Since that pause, nothing has changed in terms of showings and listing appointments. It’s been a very busy time. However, I have certainly not had the same amount of sales as I would have in years past. I feel like I’m working even more hours, but haven’t been able to get the same amount of buyers committed as I would normally.
Inman: Why do you think that is? Has the luxury market been hit hard by the pandemic and accompanying financial uncertainty?
JC: I don’t know if it’s been hit hard, but there’s been an obvious, dramatic two-month slowdown. Luxury buyers that are not in a hurry to buy have been writing lower offers than they would in a normal market. Most sellers have not adjusted to those lower offers. It’s been a little more challenging.
However, I have been able to sell some rather large homes because I have buyers who want to buy and sellers that want to sell.
What the future will hold in terms of values is anyone’s guess. I really don’t know. But the market is much better than I was expecting it to be. I was expecting a drop, like after the 1994 earthquake. I was geared up for that, but I don’t see that happening anymore. In fact, it’s been rather busy.
Inman: What is your definition of luxury? Has it changed at all amid the pandemic?
JC: No. The luxury market in Los Angeles and West Lake Village is anything more than $3 million. I have not seen a dramatic dip. However, that could very well happen. All it takes is a few sellers in a particular area that really need to sell or are extremely motivated to sell and sell at lower prices to change the marketplace in a particular area. My average sales price is somewhere around $4.5 million. The luxury market to me is still $3-4 million and up.
Inman: By being highly motivated to sell, do you mean selling off vacation properties? Sellers placing homes on the market because of fear for their financial future?
JC: Let’s say you have a million-dollar neighborhood. If those homes are selling for $500 a foot and you get a global pandemic, next thing you know, you have sellers who are panicking and they have to sell because they lost their businesses. Or they’re motivated to sell because they want to get out of the state. If all those people sell their homes for $400 a foot, it’s going to be difficult to get the next guy to pay $500 a foot.
I have particular buyers right now who are being very selective. In a booming market, buyers will overlook certain things like road noise or minor remodeling needs. In a market like this, the best homes will sell, but the ones that need an extensive remodeling have to be priced accordingly.
Inman: Are luxury sellers struggling to accept this new reality?
JC: Yes, and that’s understandable. A lot of sellers are hopeful that the prices don’t drop while a lot of buyers are hopeful that the prices do drop. And I’m in that middle ground, working with both.
Inman: Any other thoughts or predictions for the California luxury market in the coming months?
JC: I am pleasantly surprised by how well the market has performed since things started opening up. What I’m unsure about is whether this is only because of the pent-up demand or if this is an indication that the prices really haven’t dropped and the market hasn’t changed.
I think it’s too early to predict the long-term effects on pricing and real estate demand. But I am very excited to know that it’s doing significantly better than I was expecting.