Luxury Home Sales Spike Around L.A.

LOS ANGELES—Luxury single-family home sales are spiking in Los Angeles. According to a report from Sotheby's International Realty, home sales in the Pacific Palisades were up 94% from October 2014 to October 2015. Home sales also spiked in other Los Angeles luxury markets, up 46% in the Beverly Hills Post Office market, 50% in Westwood, 40% in Venice and 50% in Cheviot Hills.

"We are seeing recovery in all price ranges in the market, and most markets are fairly robust. In the luxury market, we are also seeing a robust market as well," Frank Symons, EVP and COO at Sotheby's International Realty, tells GlobeSt.com. "In the over the $3 million market, if you look at the quarterly results year-over-year, you can see that the numbers indicate how robust that market is. We work within pretty broad price ranges, and in those price ranges, we are seeing that all sectors are doing well."

The report, however, also showed that the average sales price declined in several of these markets. In the Pacific Palisades in particular, the average sales price dropped 20% to $5,023, 860, along with the Malibu market, which had a 2% decrease in the average sales price and Brentwood, which had an 11% decrease in average sales price. While this sounds concerning, Symons says that the average home price is arbitrary and has no bearing on home values. "Those numbers indicate that there is a 20% year-over-year difference or delta on the average selling price. That has nothing to do with housing value; that just happens to be the average selling price at that period of time," he says.

Symons explains that several factors can skew the average selling price, like a single high or low sale or more buyers in one price segment than another, and that the decrease in sales price may also be indicative of a wider price range of homes on the market. "When you are dealing with homes over $3 million, typically there are fewer sales than if you were dealing in, for example, the $500,000 to $1 million range," Symons adds. "As you get over $3 million, there are fewer units sold and when there are fewer units sold, a few sales, either high or low, can skew the numbers."

In some of the markets listed, like Cheviot Hills, the 50% increase means that only one more home was purchased in the submarket than the same time a year earlier. In the Palisades, which led the luxury home market, there were a total of 33 home sales compared with 17 home sales in October 2014. According to Symons, unit sales is a better indicator of market activity than average sales price, because it shows that people are buying homes. "The demand in the Palisades market year-over-year went up 94%," he says. "That speaks to a very strong market and of people wanting to get into that market. You can't control the average selling price because buyers buy in whatever range that they are in, but what is really important to look at are the unit sales."

While Symons believes that we are well past the "recovery" in the single-family market, there has been a narrative among multifamily owners and developers that the rental boom is being driven by a slow housing recovery. However, according to a recent UCLA report, homeownership is expected to improve at the end of next year.