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Los Angeles "Mansion Tax" Sparks Sell-Off Frenzy

March 31, 2023

Rise and shine! It's a new day and The Shaker is here to serve you the best mix of residential real estate news. Yummy yummy.

THE BIG SPLASH

Los Angeles "Mansion Tax" Sparks Sell-Off Frenzy

Los Angeles is experiencing a "mansion madness" as the new "mansion tax" looms. The tax imposes a 4% tax on properties between $5m and $10m and 5.5% on sales over $10m, with funds aimed at preventing homelessness in the city. 

  • With properties over $10m now classed as luxury, estate agents are offering deals to incentivize purchases before the deadline. Some properties are being marketed at $4.9m to stay below the tax cutoff, and sellers are agreeing to pay the property's closing costs instead of the buyers. 

  • The marketing of the new tax as a "mansion tax" is disputed, as many believe that a $5m house in Los Angeles may no longer qualify as a mansion. 

  • The tax is most likely to affect those buying lower-end mansions. With the outcome of the legal challenge against the tax unknown, the real estate market is adjusting to the expected tax, with buyers and sellers exploring new workarounds. 

  • The tax has caused a "chilling effect on transactions," and a decrease in sales is expected while buyers and sellers wait for the outcome of the lawsuit.

A SCOOP OF LAWSUIT

$13 Billion Lawsuit Against National Association of Realtors

A federal judge in Chicago has ruled that home sellers can proceed with their class-action lawsuit against the National Association of Realtors and several real estate brokerages for conspiring to inflate commission rates.

  • The ruling grants class-action status to past home sellers seeking over $13 billion in damages and creates a separate class of current and future sellers seeking an injunction against subsequent violations of U.S. antitrust law. 

  • The lawsuit challenges a requirement for sellers to offer "blanket unilateral offers of compensation" to buyers' brokers when a home goes on sale via a multiple listing service. 

  • The plaintiffs claim that this system puts pressure on sellers to offer high commissions to attract buyers' brokers. 

  • The National Association of Realtors has defended the practice, stating that it "creates a larger pool of buyers for sellers." While the judge's order does not determine the merits of the allegations, it allows plaintiffs to pursue large-scale claims against defendants, rather than filing individual claims for damages.

A SCOOP OF MARKET DATA

Sellers are Sitting Out the Spring Housing Market

Potential home sellers are choosing to sit out of the spring housing market despite a surge in buyer demand and a drop in mortgage rates. 

  • According to Realtor.com, new home listings in March fell 20% from the same month last year, with new listings nearly 30% below pre-pandemic levels. 

  • While the active inventory of homes for sale is 60% higher than the start of last spring, homes are taking longer to sell, with the average time on the market increasing to 54 days from 36 days at the start of last spring. 

  • This has caused concerns among home shoppers who believe the market is still overpriced, despite a drop in prices nationally for the past seven months, according to S&P Case-Shiller. 

  • Realtor.com Chief Economist, Danielle Hale, believes that what happens with rates this spring will determine whether the housing market picks up speed or bumps along this year, as home shoppers have shown that they are very rate-sensitive.

A SCOOP OF GLAM

Rihanna's $500k Super Bowl Rental

Pop superstar Rihanna reportedly paid a whopping $500,000 in rent for a luxury rental home in Paradise Valley, Arizona during her recent performance at the Super Bowl 2023.

  • The singer rented the 6,400-square-foot house near Camelback Mountain for six nights, costing $85,000 per night. 

  • The rental property includes five bedrooms, five bathrooms, a private gym, a walk-in wine cellar, and two living areas. 

  • In the backyard, there is a sizable pool with a built-in waterfall and a number of additional amenities. 

  • The property is about 30 miles away from State Farm Stadium, where Rihanna performed. 

  • Despite not receiving any compensation for her Super Bowl performance, the self-made billionaire, with a net worth of $1.4 billion, used the event to gain enormous publicity and boost her music sales. 

  • Following her halftime show, the sales of her songs rose by 390%, and the number of on-demand streaming options for her repertoire increased by 140% in the US.

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