After "extraordinary" buyer and seller frenzies during the month of March, one of the biggest names in Los Angeles real estate has warned the market has already taken a turn for the worst in the early days of L.A.’s "mansion tax."
"Over the last month, two months, we've been looking at a huge rush to try to get people to sell. We actually had an extraordinary March, a lot of high-end homes sold in March. And right now, the pipeline going forward is really, really low and really gleam," The Agency founder and CEO Mauricio Umansky said on "The Bottom Line" Tuesday evening.
The real estate mogul – who stars in his own Netflix show and has been married to "Real Housewives of Beverly Hills" star Kyle Richards for more than 25 years – explained how the area’s newly-enacted mansion tax has already impacted the market.
Officially beginning on April 1, the "United to House L.A." (ULA) measure in California adopts a so-called mansion tax on property sales or transfers over a certain value to pay for affordable housing.
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Properties sold above $5 million but below $10 million are subject to a 4% sales or transfer tax, while properties that sold for more than $10 million will face a 5.5% tax, according to the city clerk’s voter information pamphlet.
At least 92% of taxpayers' money would "fund affordable housing under the Affordable Housing Program and tenant assistance programs under the Homeless Prevention Program," the pamphlet also clarified.
"I don't think they're thinking right now. I think this comes at a really bad time. It's coming during the time where we're already trying to slow down the housing market. The interest rates are going up a lot; they've gone up by 500 basis points [in] the last six, seven months," Umansky explained.
"And right now, we're all of a sudden adding this mansion tax," he continued, "and this mansion tax is put on top of a really slow market where all of a sudden, it doesn't matter whether you're making money, losing money, you're going to owe this tax."
To avoid being subject to these taxes, L.A.-area homebuyers and sellers rushed to close multi-million-dollar deals and offload properties. But now, Umansky claimed fewer people are buying, selling or even exploring a property move.
"It's really going to slow down the housing market a lot more in Los Angeles than it already is. And it's already slow here," The Agency CEO said.
For those L.A. residents currently selling their homes, the broker recommended not raising your listing pricing while noting it could be beneficial to go "off the market."
"It's a really weird and tricky time that we're struggling with. And the problem is that we don't even know if this money is actually going to help the people," Umansky pointed out. "The way that they sold this on the ballot, it was literally, ‘Let's tax the rich and let's go fix the problem with the homeless.’ And now, they're just putting in the council in order to try to figure out what they're going to do with the money, how much money they're going to have."
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The mogul’s clients aren’t reportedly too happy about the tax, either.
"The entire public really voted on a proposition that wasn't even fully thought out. It was so poorly written. Most people don't even know about it," Umansky said. "When I'm talking to my clients about it, they can't believe where it came from. They don't understand it. They don't know how it got on the ballot, and it's a real mess."
