‘Selling Sunset’ star on LA’s ‘pretty wild’ luxury market
Emma Hernan, one of the star agents in the hit Netflix series, discussed LA’s mansion tax, cash offers and more with Real Estate News.
- Hernan said the passing of the mansion tax only worsened the low-inventory environment in Los Angeles.
- “Cash is king,” but for buyers using financing, she advises them to get into a home now and refinance if rates come down.
- Competitive multiple offer situations are starting to return in the ultra-luxe space.
While Emma Hernan's starring role in Netflix's "Selling Sunset" depicts her living the glamorous life of a luxury real estate agent in Los Angeles, she is still on the ground with clients negotiating deals during a turbulent year defined by still-climbing home prices and mortgage interest rates that hit multi-decade highs.
So how did the luxury market fare in 2023, and what does 2024 have in store? Hernan spoke with Real Estate News about LA's mansion tax, cash deals, multiple offer situations and more. This interview has been edited for length and clarity.
LA adopted a 'mansion tax' this year. How has it affected luxury home sales?
This mansion tax, particularly in LA, played a really big role on the market. Sellers now pay a new tax on any home sold over $5 million, and a higher tax on homes sold for more than $10 million. We saw sellers debating if they wanted to actually sell their house because it wasn't penciling out anymore, and we saw buyers frustrated because that pushed inventory down.
When it was originally proposed, the public was told there were a lot of benefits that would come from it. But the problem is that nobody wants to sell their house anymore, and you're not generating the income that you thought you were going to make. So you have a loss in revenue for all of these real estate developments, and everything's on hold.
Sellers are now either barely going to break even or they're taking a loss because of this new mansion tax. I hope at some point it could be overturned or reconsidered or restructured because it isn't penciling out right now for anybody.
How is the market doing overall in your area?
Between the mansion tax and interest rates going from what they were to what they are now, it's pretty wild.
So I personally, and the brokerage, saw a big slowdown in the market. We usually take most of our listings off the market around the holidays and Christmas, then put them back on in January. But I've seen a lot of people looking to buy because they think there's a good chance that interest rates are going to come down a bit.
Are all-cash buyers still out there?
I'm definitely still seeing that. The two offers I'm putting in right now for my clients are cash. So cash is king. And I think you're going to see a lot more cash buyers because they're able to get in and get a deal on a house since interest rates are out of control.
People who aren't cash buyers are finding that they can no longer afford a house that was originally $2 million, $3 million or $4 million — the price doesn't matter because they're looking at their cost per month.
I just got an escrow with one of my clients, and they put a little bit more cash down than normal. A bit of advice I gave to them and my other buyers who are trying to get into the market is that they might as well get ahead of the curve, and when the interest rates come down, they can refinance. I think that is the smartest play right now for someone who's really looking to get into a house.
Are many homes getting multiple offers?
I would say about eight months ago to a year ago, we were seeing crazy multiple offers on each and every home, regardless of the price point. There was a property that had 60 offers, and yes, I said that correct: six-zero. But we're definitely not seeing that anymore because of the interest rates.
I'm putting in an offer right now on a $24 million house, and there are three offers coming through. So while there are definitely not as many offers, to have a $24 million house — a house specifically in the mansion tax category — with three offers expected, I do think that signals a little bit of a pickup in the market, which I'm really excited about because I would say the end of summer and all of fall was completely dead for the most part.