Is Now a Good Time to Buy and Invest in Los Angeles and Southern California Real Estate?

Key Market Factors of Los Angeles Residential Real Estate: Tax Initiatives and New Legislation.

Current US real estate data studies suggest that there are three primary market factors that impact and predict trends in real estate values and the long-term market stability and sustainability of home prices. The focus of these studies pertains to major global cities and geographic regions and includes Los Angeles and Southern California, the region that continues to demonstrate steady annual growth and relative market stability.

According to CoreLogic, a leading provider of insights, information and innovative solutions to both the residential and commercial real estate industries, their year-over-year sales data from March of 2024, show Los Angeles home prices rose a steady 4.6% and is ranked “low” on their CoreLogic Market Risk Indicator (MRI).

The key market factors that determine home market strength (or “at risk”) are: Environmental and adaptability to climate challenges and infrastructure investment. Social and Business desirability and lifestyle, and Legislation and Government Regulations.

As the United State federal and California state elections are soon to take place on Tuesday, November 5, 2024, there is a potential key ballot measure, as well as a soon-to-expire tax initiative that will likely affect the short term and potentially long-term real estate values and prices, while still providing viable wealth transfer strategies to better handle tax liabilities and legacy estate planning.

Specifically, one ballot measure currently seeking to qualify for the November ballot and voter approval is the Taxpayer Protection and Government Accountability Act. Broadly, The TPA measure seeks to: 1). Guarantee Californians the right to vote on all state and local taxes. 2). Restores the two-thirds vote threshold on all local tax increases qualified by citizen-backed initiatives. 3). Bans new statewide surcharge on property other than the current property tax in the constitution (Restores the intent of the landmark, real estate measure Proposition 13). 4). Requires all new taxes to designate a use, rate and duration. 5). Prevents government officials, “bureaucrats,” from imposing new hidden fees without specific majority from elected officials.

The Intent of the TPA measure is to repeal the recently passed ULA measure, otherwise known as the “Mansion Tax” which passed and has been adopted by many California cities, and now currently being proposed in other US states, as well). The ULA measure imposed significant increases in the transfer tax on the sale of high value homes: The point-of-sale ULA transfer tax of homes sold over US$5,000,000 ULA was increased to 4% which is an applicable tax rate increase to 4.45% and on homes sold for over US$10,000,000, the transfer tax is 5.5%, an applicable tax rate of 5.95%.

Further, a key tax initiative that has become a center of attention for single and multiple homeowners and set to expire in 2025 is the US$12.92 Million per-person estate tax and US$25.84 million per couple estate tax exemption enacted as part of the Tax Cuts and Jobs Act of 2017. Once expired, estate tax exemptions will return to its 2017 levels of US$5.5 million per individual. Consult your tax and estate professionals on how this real property tax exemption might best benefit your wealth transfer plan.

Both these legislative initiatives and estate tax exemption over the next few years will impact the value of your real estate assets and more importantly have an important long-term effect on market timing and seasonal and cyclical market trends and can provide better decision making of when to buy and sell along with the more closely monitored mortgage rate and available inventory.

Watch for more public outreach on these legislative and tax initiatives and contact me for consultation and current market performance and outlook of luxury homes and the buying, investing and selling of Los Angeles residential real estate assets. Contact info: Michael Hiatt, Broker Associate, Sotheby’s International Realty. Pacific Palisades, California, USA. Michael@michaelhiatthomes.com. Website: Hiatthomes.us and GPSLA.us.




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