The Inman community will gather virtually for Connect, June 15-17. It’s a powerhouse lineup of speakers, and our focus is on the New Normal: what business looks like on the other side of the pandemic. Let this conversation with one of our June Connect speakers serve as an appetizer, and don’t forget to grab your ticket to June’s Inman Connect before prices go up.
As it slowly emerges from the pandemic, Los Angeles is seeing something very interesting unfold in its luxury market.
The city, which lost over 100,000 residents to what are often less dense and less expensive places during the pandemic, still has far more people interested in buying a home within the $1 to $10 million range than there are properties on the market. Homes sell fast, often with bidding wars and for all-cash, while agents often struggle to find properties that they can show their clients before they’re snapped up.
Mauricio Umansky, a top luxury broker and founder of The Agency, told Inman that despite the strong sales numbers seen from summer 2020 and onwards, the city is still trying to catch up to pent-up demand from affluent homebuyers who held off on purchasing for whatever reason.
After a year of seeing people invest in amenity-rich homes in the suburbs, some are finally deciding to take the plunge on an urban condo. Others, particularly wealthy international buyers interested in the city’s ultra-luxury market, are only now able to come into the country and tour the homes they want to buy.
“There is a tremendous shortage of inventory and I think [it] is the only thing really holding us back,” Umansky said. “I believe we still have a solid year’s worth of demand but the supply is holding back the pace at which things are selling.”
Inman recently caught up with Umansky to learn more about the state of the L.A. luxury market and why he’s excited to get back to the office.
A year ago, we were talking about how hot the market was despite the pandemic. Is that still the case?
At the beginning of the pandemic, we all thought we were done — that we would have to close offices and make some really difficult decisions.
Instead, we started seeing more of a hockey stick recovery. The last 12 months have definitely been really strong and it all started around June of last year. That was the beginning of the strong recovery.
The government has put a lot of money into the economy, interest rates are still extremely low and the consumers are still fascinated with not only owning bigger homes and the whole “home is a major part of your life” idea, but also second homes, third homes and vacation homes.
People started to look away from urban environments and toward suburban and rural environments, beach and mountain towns as primary residences. There’s been a lot of movement within the U.S., particularly having to do with tax implications and toward states like Florida and Texas.
What hasn’t changed in the last year?
There is a tremendous shortage of inventory, and I think [it] is the only thing really holding us back. I believe we still have a solid year’s worth of demand but the supply is holding back the pace at which things are selling. Fear of inflation is a catalyst for a very strong market.
I also believe that similarly to the way that we saw pent-up demand after the U.S. was closed for three to four months, we will see pent-up demand from the international buyers who have not been in the market for the last 15 months over the next year.
Let’s talk about the high-end urban condo. That market is coming back with a vengeance, correct?
That is definitely coming back to life, and I think that as people start going out to restaurants and clubs and bars and parks again, they are also going to get excited about their cities and urban living again.
I think the best example of that is Manhattan. Manhattan was pretty much dead for the last 15 months, but you’re now starting to see a hockey stick recovery with vertical living and condos.
What we’re seeing in Los Angeles, you’re going to see in different urban cities [all over the country]. You’re actually starting to see a little bit of a slowdown in some of the rural cities like Santa Barbara.
It’s not a true slowdown, you’re just starting to see some retreat from that massive frenzy [we saw in 2020]. It’s still a strong market but it’s going down from a market that was incredibly high back to a strong normalized market.
You and your team are preparing for a return to the office on June 15. What’s that like?
We are excited to get back into the office. We earned our WELL Health-Safety Rating badge and are excited to create environments that are healthy while also having all of our team working together again.
With the tight inventory that we’re experiencing, being around colleagues and talking about the off-market opportunities of buying and reselling becomes a much more efficient way of buying inventory. We’re very excited to get back into the office so that we can get better at finding inventory again.
Let’s talk about the differences between luxury ($1 million to $20 million) and ultra-luxury ($20 million and up). What’s happening in those markets?
We’ve had a strong market but a lot of that $20 million and up market is fueled by international buyers. We are definitely looking forward to that client getting back into the market and purchasing.
I wouldn’t say there’s a surplus of inventory in the ultra-high-end market but, in the $1 to $5 million market, there’s definitely a lack of inventory.
What advice would you give developers? What type of homes should be built?
Look at what the supply and demand curves are. [That will help you see] if you can build houses that everybody wants to buy and still make money. You always have to look at your different cities and what the different inventory levels are.
If you can look at those graphs and build to those inventory levels, you’re always going to make money.