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Los Angeles' Luxury Housing Market Could Be Starting to Cool

The luxury sector trailed behind the rest of the market

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A view from a home for sale in Malibu.

SOTHEBY'S INTERNATIONAL REALTY
A view from a home for sale in Malibu.
SOTHEBY'S INTERNATIONAL REALTY

As concerns over slowdowns in luxury markets from New York to London to Dubai persist, Los Angeles appears relatively unscathed.

However, some cracks—albeit small—are now starting to appear in a market that has gone from strength to strength in recent years. New research shows that luxury prices remained flat in the second quarter of the year and did not keep up with the overall market amid reports that the Brexit vote and global economic uncertainty are starting to dampen demand among wealthy investors.

According to research by appraisal firm Miller Samuel on behalf of Douglas Elliman Real Estate, the median sales price in L.A.’s luxury sector, defined as the top 10% of sales, was $5.9 million in the second quarter, 0.3% lower on the year. At 159, the number of sales was 3% lower.

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“It’s softer at the top, but the top and the balance of the market are firmer and in better shape than most of the housing markets that we cover. The market is still very tight,” said Jonathan Miller, chief executive of Miller Samuel and author of the report.

The overall market appeared to still be faring well. The median sales price in greater L.A. increased 7.7% year-on-year, to $1.01 million between April and June, the second-highest figure on record. At the same time, the average price per square foot increased 3.9%, to a record $774.

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While the number of sales declined 1.7% over the same period last year, to 2,816, they remain about 27% above the decade average, while the absorption rate remains at a blistering three-month pace, compared with eight months in the Hamptons.

The number of days a property spent on the market was unchanged at 56, while the listing discount was 2.1%, up from 1.4%. In contrast, in New York, properties spent an average of 89 days on the market.