Sales, Leases, Taxes and Inventory, Marguleas Discusses the Palisades Market

Amalfi founder Anthony Marguleas as businessperson of the year by the Palisades Rotary Club. YMCA Executive Director Jim Kirtley (left) presents the award.

Anthony Marguleas, the founder and owner of Amalfi Estates, spoke to the Optimist Club on April 2 about the current real estate market.  He said, “You never regret buying real estate; you only regret selling.

“More people stay in their homes in Los Angeles (17.8 years) than anywhere in the United States,” he said and added that three years ago, California became a renter’s state, meaning more people are renting here than owning.

“Affordability is a big issue,” he said adding that this problem hurts the middle-class, like nurses, and teachers who used to be able to retire on the equity they built up in their homes.

He looked at the audience, most of whom had purchased their homes 40 and 50 years ago and noted that investment provides them “retirement security.”

“What will happen to the middle class who are wondering about how they will retire?” he asked.

Usually, about 120 homes are on the market at any one time in the Palisades, but two months ago, there were only 49, and now there are about 72.

To give perspective, in 2021, about 32 homes were sold each month; this year, the average is only 12 homes selling a month. “We are projecting 140 homes to sell this year when in 2021, 381 homes sold,” he said. “That is a staggering 63% drop.”

He added that, “This is the lowest inventory and the lowest number of homes selling in 30 years.”

He went through the selling cycle in the Palisades: the peak was in 2008, and by 2011, the market had hit bottom.

It climbed back up for 11 years to 2021, when the most homes were sold in 30 years but also the lowest interest rates and highest annual appreciation.

Then, the market turned. In 2022 and 2023, there were some of the lowest sales transactions in years.

Although there are only 72 homes for sale, about 100 properties are on for lease, which is unusual, Marguleas said, because normally there are 50% more homes for sale than lease, and now there are 40% more homes for lease than sale.

The low inventory might be explained by several factors “People who aren’t getting what they want for sale are deciding to lease,” said Marguleas, who founded his company, Amalfi Estates in 1995. By 2022, The Wall Street Journal ranked it as one of the top 10 teams in the nation out of over 2 million agents and teams.

According to Marguleas, who has been quoted in Barrons, Architectural Digest, Extra, Bloomberg, Extra, Mansions and Millionaires, Forbes, Mansion Global, MSN, People, Robb Report, The Hollywood Reporter, The Real Deal, USA Today, The Wall Street Journal, Yahoo Money, there are six things constricting the current market:

1) In the Palisades, which is in a very high fire severity zone, people are losing insurance, and others are having problems finding coverage. Through the state, people can sign up for the California FAIR plan, but that insurance coverage doesn’t exceed $3 million and doesn’t include liability coverage.

2)    The writers and actors strike in 2023, meant that people were out of work for about half a year.

3)    ULA, dubbed the Mansion Tax added 4-5.5% transfer tax on properties.

4)    It is an election year, which can make things uncertain.

5)    People with low mortgage rates don’t want to move and take out a higher one.

6)    The war in the Middle East.

The ULA, which passed in 2022 and went into effect on April 1, 2023, was sold to voters as a way to build more housing for the homeless. ULA was expected to raise $1 billion. It placed a 4% tax on property sales (residential and commercial) above $5 million and 5.5% for properties over $10 million in L.A.

The tax collected since the act passed is $215 million, is far below the projection.

“ULA lowered property values,” Marguleas said, noting that if a seller had asked $5.5 million for a property, once ULA became law, sellers dropped the price to $4.99 million” to avoid the tax.

“The high-end real estate market is “very flat right now,” he said and noted that because of ULA, there are 50 percent less home sales over $5M, and developers have cut back quite a bit.

That measure is being challenged in court. Voters may also have a say in the form of the Taxpayer Protection Act, which could be on the ballot in November. That act would require that any measures passed must be with a two thirds majority. ULA passed with a 58 vote so if 2/3 are required there is a chance it may get repealed.

Sue and Anthony Marguleas with Sherry Lansing at a fundraiser for the American Cancer Society.
Anthony, the founder of Amalfi Estates, is a presenting sponsor of the event.

Marguleas also addressed the real estate commission lawsuit.

“The NAR (National Association of Realtors) is the number one lobbying “group in the nation,” he said.

Antitrust lawsuits were filed against NAR because sellers believed commissions were inflated and that the way buyers’ agents were paid, needed to be changed.

About 500,000 Missouri home sellers sued the NAR and won. They argued that the current practice reduced competition and inflated commissions and home prices.

Before the lawsuit, a commission of about 5 percent of the home price was divided between the seller and the buyer.

I think “it’s [lawsuit] a great thing,” Marguleas said. “Commissions were inflated.”

The best way to understand this is if a buyer is required to pay their agent the commission when they buy a $4 million Palisades home will they be willing to cut a check for $100,000 to their agent (2.5%)? Absolutely not, because now they can hire a real estate attorney to negotiate and deal with the contract and jus pay a buyer’s agent hourly, to show them homes.

Starting in July, buyers will sign a separate contract with an agent, which gives more transparency about how agents are compensated. It is thought that since sellers will no longer be paying for the buyer’s agent commissions, some properties may sell for less, but in reality, the seller will just save some money on commissions.

“The market will tell where the “commission should be,” he said.

The Palisades has 268 real estate agents, with 140 homes on track to sell.

With that kind of inventory, Marguleas feels there “are too many agents.”

He said there used to be a million realtors in the country 14 years ago and now there are 1.6 million selling 30% less homes.

“Once this law is enacted, many part-time agents who sell 1-2 homes a year will be out of the business,” Marguleas predicted.

His philanthropy is legendary, he knows the town and the real estate market. Annually, he gives to Village Green, a non-profit, private park. One year he saved the town’s Fourth of July parade with a $27,000 donation.

He supports Pacific Palisades Baseball Association, Corpus Christi School, Palisades Charter High School, Palisades Elementary, and Paul Revere Middle School.

Marguleas’ leadership at Amalfi has inspired his small office of 7 agents to give back 10 percent of net commissions to one of six charities: Make-a-Wish (Kids), Wags and Walks (Pets), The American Cancer Society (Health), The People Concern (homelessness), Homeboy Industries (Local) and Health the Bay (The Environment). Since 2015, he and his team have contributed $2.2 million helping 50,000 families through their charitable initiative.

Members of the Amalfi team handing out pies includes (left to right): Brian Bogulski, Briar Pecsok, Xander Hurley, Max Marguleas, Anna Bilan-Vogelsang, Anthony Marguleas and Hessel Evelaar.

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2 Responses to Sales, Leases, Taxes and Inventory, Marguleas Discusses the Palisades Market

  1. Michael says:

    Does anyone really need a $5,ooo,000 home. When I drive out of town guests around, I explain that the houses are so big because the couples living in them can’t stand each other and need lots of space in order to stay as far from each other as possible. The bigger the house, the less stable the marriage.

  2. Sue says:

    Hi,

    Can you tell me where you found the statistics that the bigger the house, the less stable the marriage? I grew up in poverty and a lot of people who lived in “mobile” homes didn’t have a particularly stable marriage.

    Sue

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