Strikes & The L.A. RE Market

Hey, LUXE BLOG readers! Lately, we’ve been talking quite a bit about California. Don’t get us wrong. We’re not throwing shade at the Golden State. In fact, many of the issues we’ve discussed could happen anywhere. Recently, we’ve talked about sleeping pods in California renting for $900 a month and reasons why Californians are leaving for Arizona. But today, we’re talking about the recent strikes in Hollywood. And most importantly, their effect on the L.A. real estate market.

Hollywood Strikes

Labor strikes in Hollywood have sent ripples across various sectors. The most recent ones involving the Writers Guild of America (WGA) and the Screen Actors Guild (SAG) are no different.

• Strikes put deals on pause
• Affects more than just actors and writers
• Creates a hesitant buyer pool

While it’s hard to attribute the decrease in real estate activity solely to these strikes, the impact has been palpable. A once-bustling buyer pool, which includes not just actors and writers but also people in production, seems to have taken a step back. This results in fewer transactions and contributes to an overall sense of uncertainty in the market.

Also Read: That Time You Heard California Sleeping Pods We’re $900 A Month

The WGA & SAG Strikes Have Affected LA’s Real Estate Market

The Role Of High Interest Rates

But strikes aren’t the only culprits here. There’s more to the story.

• Rates began rising in March 2022
• Adds to the consumer hesitation
• Amplifies the effect of strikes

Interest rates have been on an upward trajectory since March 2022, making the real estate market a bit jittery. And this was BEFORE the strikes happened. When you combine higher rates with the uncertainty stemming from Hollywood strikes, it amplifies hesitation.

California Mansion Tax

April 2023 saw California introduce Measure ULA, a new mansion tax that’s been causing quite a stir in the high-end housing market. Here’s what you need to know.

• Extra Tax Layers: 4% levy for properties between $5 million and $10 million, and 5.5% above $10 million.
• Immediate Impact: The tax change caught both buyers and sellers off guard.
• Sharp Decline: Luxury home sales plummeted, with only two homes above $5 million sold in April.
• Sellers in a Rush: Incentives were thrown in to attract buyers.
• Legal Challenges: The mansion tax faces lawsuits questioning its legality.

Just when you thought California’s real estate scene couldn’t get any more complicated, Measure ULA comes into play. This extra tax has not only jolted the market but has also raised questions about its legality. While the lawsuits unfold, the state of uncertainty only thickens. So, considering a sanctuary like Arizona doesn’t seem like such a bad idea. Agree?

Also Read: The California Mansion Tax Drama: Impact, Lawsuits, & LOL

Inventory Woes

Low inventory is yet another key element affecting the L.A. market.

• Fewer available properties
• High selling prices despite strikes
• Owners locked into low-rate mortgages

There is a sheer lack of available properties in Los Angeles. Even with the strikes and high interest rates, properties that do hit the market are selling at strong prices. Additionally, people who got mortgages when interest rates were low are reluctant to sell. This contributes to a market where both buyers and sellers are hesitant to make moves. Same here in AZ.

The New California Mansion Tax Has Come Into Play

Strains & Reserves

Although foreclosures and payment defaults are not rampant, there’s another concern.

• Financial reserves running low
• Risk of added financial strain upon selling
• Selling not a universal solution

Real estate professionals have heard that many industry clients only have enough financial reserves to last until the end of the year. Selling one’s home to gain liquidity could lead to more financial strain.

Cali’s Complex Market

In summary, the strikes in Hollywood have indeed created a ripple effect that is being felt in the L.A. real estate market. But they’re not alone. High interest rates and low inventory are also playing significant roles in this slowdown. It’s a wild situation with multiple factors at play. And it makes the market trickier to navigate for both buyers and sellers. Stay tuned as we continue to explore these types of stories here on LUXE BLOG.

Also Read: Why Are Californians Moving To Arizona?