Boroughs & Burbs 187 || Los Angeles Right Now

Tune in to Season 5, Episode #187 of Boroughs & Burbs for an exclusive discussion on the current state of the Los Angeles real estate market with Peter Hernandez and Kevin Krakower of Douglas Elliman. With decades of experience, Peter and Kevin offer unique insights into the shifts and trends shaping LA’s high-end market. From rising demand in specific neighborhoods to the evolving luxury market, they share what buyers and investors need to know. Whether you're exploring opportunities in the City of Angels or simply curious about the trends, this episode provides a comprehensive look at LA real estate today. Don’t miss out!

Transcript

SPEAKER_00: 0:00

The Burroughs are New York City. The Burbs are everywhere else. Real estate is the ultimate game of risk and reward. It's the biggest investment most people ever make. Fortunes are made over a lifetime and lost in a day. And we're not playing with monopoly money. How do you stay ahead? Who's buying? Who's selling? And why? What do they know? We want the truth. You need an edge. Burroughs& Burbs is your secret weapon, giving you the insider knowledge and strategies you need to succeed in the high We press the experts to expose the pain, find the deals, and occasionally predict the future. That's Burroughs& Burbs, Thursdays, 3 o'clock Eastern, noon Pacific. Because everyone can make money in real estate.

SPEAKER_04: 0:52

Welcome everybody, Burbs and Burbs, number 187, Los Angeles right now. And we have our two special guests today on the show. Peter Hannes Hernandez is coming back for the second time. And we've got Kevin Krakauer for the very first time. And I figured, oh, well. Peter Hernandez, he's a pretty big draw. But the calls were coming in from Florida yesterday saying, you got Kevin on the show? Oh, this is going to be a good show. So I was like, wow, he's known far and wide, this Kevin Krakauer. And so I'm very excited about the show. I've been thinking about it ever since I got that phone call. Welcome, guys.

SPEAKER_05: 1:34

Yeah. The subject

SPEAKER_04: 1:38

is... Los Angeles right now. And it's been a while since we've done a show in the Los Angeles area. And a lot's been going on. Economic change, the fires. So I don't know. Where would you like to start? Well, let's begin at the beginning. Kevin, why don't you tell us who you are, where you're from, and how long you've been in the business?

SPEAKER_01: 2:03

Thank you, John.

SPEAKER_04: 2:05

I see I'm getting ahead of myself. I'm so excited.

SPEAKER_01: 2:08

Yes. Well, I originally grew up in Philadelphia, moved to Los Angeles after I finished college in the early 90s. And I worked in the entertainment business for a long time. And then in like 2011, 2012, I got into real estate and I've been doing it ever since. And I've been working with Peter ever since. I think my first eight months I was... at Prudential. And then I met Peter. And then ever since then, I've been in the same office for many, many years. What did you do

SPEAKER_04: 2:45

before real estate? Entertainment?

SPEAKER_01: 2:48

Yeah, I worked with a lot of people at LA. Sure, of course. I was very interested in music when I graduated college. I went to this small little liberal arts college called Bennington in Vermont. And after about three years, I got a record deal. first on Capitol, then on Elektra. And then my first single came out, my video got on MTV and it went on to be a pretty popular hit and sold a few million records and toured the world. That was my first experience really of getting out of seeing places I could have never imagined going to. And then... this director named Brett Ratner really encouraged me to come work for him. He was like another like white Jewish guy like myself who loved hip hop. And he just, he was, You know, you can't say no to him. And then I started working with him side by side with him for like 10 years. And that was, it was just like being in a band. I mean, we, I got to work with him on all these movies all over the world and it was so much fun working with him. A

SPEAKER_02: 3:57

couple of things that I am thinking about right off the bat. You sold a couple million records. That's huge. And you said, you can't say no to Ratner. And I'm thinking, I've never had the opportunity to say no to him,

SPEAKER_01: 4:09

but. No, he's, he's, he is this, I mean, we kind of grew up in the same era and like, we love the same music and we dress the same. And it was just like, it was, it was great to work with him all that. And I learned a lot from him and the people that worked for him as well. But that was fun. Yeah, I do. I still have my platinum record up in my bathroom. Perfect.

SPEAKER_04: 4:36

And Peter is with us for the second time. But for the people who don't know who you are, I guess in a nutshell, you created an agency from scratch. You've been in this business for a very long time and sold it to Elliman and now run the West Coast. Is that correct?

SPEAKER_03: 4:52

Well, I mean, yes, that is correct. So let me give you my little thumbnail history. Born in Washington, D.C. We lived in Woodbine, Maryland. Moved out to the Palisades, Pacific Palisades, where the fires just recently occurred in 1954. I was two years old at that time. Sort of just became this surfer party kid that probably did that way too long into his life while dad tried to pull me into the real estate business, which I swore I would never, ever, ever do. All my friends were becoming, you know, record producers actually musicians they were becoming famous doctors and you know and it was a who's who's list you know from where i lived and uh and so here i am going to be a real estate agent with my dad you know down in venice and venice wasn't hip and cool i mean i was it was hip and cool don't get me wrong but it wasn't didn't have the stature it has today and uh so that was like 10 years of just being a really really mediocre agent and uh it's something clicked at about the 10th year and I started rolling, doing well. I joined the John Douglas company, got into management. Cobo Banker bought John Douglas. They promoted me to president of Cobo Banker and chief CEO. Did that for five years. And then what you brought up is I launched Telus Properties, which was an amazing adventure, great company. got up to just under 3 billion in sales. We had about, I don't know, 700 agents in the company. We were about 20 offices and it was just a great experience. And then when Douglas Elliman came knocking along and everybody, you know, it's funny when you're in those circles, like you've heard the stories about Elliman being, you know, receiving offers and stuff like that. That stuff has happening all the time when you own a company. Like when I, I mean, I had, The agency wanted to merge. John Arrow wanted to either buy us or do something with us. Sotheby's knocks on your door, call a bank. So everybody's constantly talking and trying to figure out how to leverage each other to improve their market share in the space, right? And we were no, no, no, wrong fit, wrong fit, wrong fit until Elliman came along and they were going, yeah, Elliman, let's talk to them. This could be a good move. And that's literally how it happened.

SPEAKER_02: 7:20

What year was that?

SPEAKER_03: 7:21

That actually, the sale closed in, I think it was August of 2017, believe it or not. So I'm in my eighth year now at Douglas Elliman in my current role as president of California and Nevada.

SPEAKER_02: 7:34

Time passes fast, doesn't it? So

SPEAKER_03: 7:35

fast. So fast.

SPEAKER_04: 7:38

That is a great segue into Los Angeles right now. A lot of us on the East Coast and around the world consume Los Angeles real estate market from TV shows like Selling Sunset. And so we get a very skewed picture of how real estate is sold. It does occur to me, though, that with a city as spread out as it is with hundreds of thousands of agents, that the luxury property space in a city like Los Angeles is controlled by a very small group of people. of highly qualified, highly connected agents, even more so than in New York. But I think it's also true in New York. Can you speak to that? I mean, the perception of the L.A. market and the reality of the L.A. market, the luxury market? To Kevin or me? Whoever is

SPEAKER_03: 8:40

inspired. You want to start on that, Kevin? Go ahead, Kevin. You start. Yeah, I'll start. Sure.

SPEAKER_01: 8:44

I mean, yes, it's like, I think for, for a lot of us agents who like have a good business and work very hard and are hustlers seeing those shows where like a deal's done in 15 minutes by a handshake without any disclosures and everyone's like happy and walks away in the end, like there's, that's fun to watch on TV and I certainly enjoy it, but that's not the reality of how hard we work. And I'm pretty sure everywhere in the world, not just LA, we just have more shows about real estate here. And there are, of course, a lot of top agents and they do get a lot of top listings, but a lot of those listings need buyers to come as well. well. So I mean, I think you develop look, the longer you're here, and the longer you're able to work together with any of the agents in your market, you know, you know, he developed good relationships. So like, you know, there's a lot of us that might not be on a TV show, but have very good businesses and good relationships with a lot of the working agents around here. Plus, like once you've uh, you know, worked with them or they've worked with me, um, and they had a good experience because like, for me, my ultimate goal is just to not be annoying and do a good job for my clients, you know, that builds, uh, you know, a level of camaraderie that, so the next time, you know, I would imagine if all things were equal, and there's multiple offers and the owner or the seller doesn't know which to pick. For example, if I'm a buyer's agent and they go, which should we pick to the agent? Because these are all just as good. It's been my experience that agent's gonna recommend the agent that's like they enjoy working with, given that all things are equal.

SPEAKER_04: 10:40

I mean, it occurs to me that either I'm going to connect with you Because I'm in the entertainment business and you get me because you were in the entertainment business and you've been working at this full time since 2012. Or Peter, who said, my family's been here in the Palisades since the 1950s. And so, you know, I've seen the changes and nobody knows this neighborhood better than Peter. So it's either. You know, they're gonna connect with you on an emotional level because they can identify with you and your shared experience. And, of course, the history in the region and the history in the neighborhood counts for something. When you were saying that, Peter, I'm thinking, oh, yeah, the California surfing scene that I see on Beach Boy album covers. And when I watched the documentaries of Laurel Canyon, you know, developing in the 60s, and I'm like, oh,

SPEAKER_03: 11:35

Peter was around for all that. Yeah, yeah, yeah, totally, totally. So as a young boy and my brother was maybe 20, think he's like 12 years older than me so we were separated quite a bit by age and it was exactly moon doggy gidget in the palisades i mean the hot dog show was there which is where they sold my favorite hot dog the husky which was chili had chili on it and and what would you would see outside is you would see all the woodies with the surfboards and then you would see all of the lowrider motorcycles. You remember back then, you were either a biker, lowrider, or you were a surfer. There was a clear line between the two. My brother fell on the biker side. He used to have the cool bike with the black tank and the green flames on it and everything. And they would drive through the Huntington Palisades, which is one of the most luxurious parts of the Palisades, you know, terrorizing neighbors. Or you would have the Aubergs and some of these different people that were the surfer crew. And they all kind of got together. We're friends and everything. But it was just so cool. And then you see how that evolved over time to more, you know, surfing changed. It became like a legitimate sport. It became, you know, you train for it. You become a Kelly Slater. You become a, you know, a very, very... uh polished athlete and and so much of our i think our allure in la is you know hollywood music surfing i mean these are things everybody wants i mean we have people coming and buying you know like these 30 40 even 100 million dollar homes in malibu because they want to learn to surf they want to be part of that hip cool culture And so they'll do that. Or, you know, or you look at, you know, the, you know, the music industry and how it's, you know, whipped through Sunset Boulevard and the bird streets and the Roxy and the whiskey and all these down to the Viper room and all this stuff. So it's, it's, it's Hollywood. And I would say the entertainment industry is a big driver of our business in our world.

SPEAKER_02: 13:56

Can I ask Kevin a question? Kevin, you're on the ground and, um, You know, I know nothing about Los Angeles, but what I do know is that it's very spread out and it takes forever to get from one place to another and things like that. And you're working, you know, I work in Manhattan. I have people who could live, you know, they want to live in the Lower East Side. They want to live in the Upper East Side, Upper West. It's very contained for me. It's compressed. And I can get to those neighborhoods. I can very quickly. And I can know those neighborhoods very easily. As a point of specializing in, let's just say the Palisades or in Beverly Hills or things like that, and you have a client who has a big budget and they wanna maneuver around these places, do you have colleagues or do you mean, how do you manage expressing expertise in these places?

SPEAKER_01: 14:45

I mean, so- Waves, you use waves, right? So it's good timing, you know, knowing how you can get across town at certain times of the day and knowing when it will be impossible. But I have clients that like, say for example, that lived in Santa Monica and they decided they wanted like a bigger house or a bigger backyard and they wanted to move toward in the Valley to one of the nice areas in the Valley. So like, I'm, I know all these areas, it's a big city. It's not like, It's not as clustered and tight as Manhattan. So I'm not going to refer them out to another agent over there because it's not actually that far away. It's just managing the traffic and getting over there. But can you learn the product? Do

SPEAKER_02: 15:35

you know the product in all these different areas?

SPEAKER_01: 15:39

I do because there's... We have a broker's open or caravans or open houses, and I can go to all those properties for the days for the brokers and for the open houses. Also, lots of agents, we'll call it the valley, have done business with me. I've done business with them. I can certainly call them. for questions if I'm unsure about a certain block or certain street. But I don't want to fur that business out because it's not that far away, not that hard. And by the way, also in the back of my head, for people that move out of Santa Monica, and are moving before out of the Palisades or even Brentwood and are moving to the Valley, I've always in the back of my head going, I don't think they're gonna be as happy there. It's the idea of more space. And sure enough, more often than not, any house I've helped sell them, Inevitably, they call me after a couple years and be like, we miss Santa Monica. We want to come back. And I end up selling that house and finding another place back. It's really hard to leave, I think, sort of the beach coastal area. Once you get down here, it's just really hard. And that's why there's a lot of joking in Los Angeles where the 405 sort of separates the east side and the west side of the city that like once you're on one side, you don't really go to the other side. You know, if you don't have.

SPEAKER_02: 17:05

And the 405 I'm looking is pretty tight to the coast for that matter.

SPEAKER_03: 17:09

Yeah. Well, and you know, to Kevin's point, the 405 is a divider. There's east of the 405 people who want to be east of the 405 and they choose to be there because a lot of the theaters, music venues, Dodger Stadium, downtown L.A. If you're west of the 405, it's it's hard to get there. So people that love those types of things tend to live in that kind of an area a little bit more. Beach people, outdoor people, people that are more focused on, I don't know, maybe the outdoor lifestyle. They're going to tend to live more on the west side of the 405. Don't you think, Kevin? Yeah.

SPEAKER_01: 17:46

And I just want to jump in here about this too, because this is a thing that like, you and I, Peter, take for granted, but I had to learn this when I moved out here, that every other major city in the entire world, including Manhattan or Philly where I grew up, there is a center downtown where the center of the city is and everything sort of grows out of that. And that is not the situation in LA, which is very unique for a modern city. It's the only modern city where downtown is not the center and the city is made up of like 19 or 20 little cities, each with their own personality. And a lot of times when I get referred clients coming from the East Coast or other areas and their friends have told them, you have to live here, you have to live here. Even though I want to sell them a property, I really encourage them to rent for a year because in that first year, they're going to find out what part of the city they're gravitating to because there's no center. You know, all their friends might tell them they want to live in Santa Monica, but they find out that they like Venice more or they like Mar Vista or they or they, you know, they want to go across the 405 and like Los Feliz or Silver Lake. So I and I know all the ones who have taken my advice and rented first always appreciate that because it always happens. It's their friends tell them where they should live and they figure out really where they're where they're most comfortable. Because is

SPEAKER_02: 19:17

there any. Is there any part of downtown Los Angeles that is kind of a cool urban feel and people actually live there? Yeah,

SPEAKER_01: 19:27

absolutely. There's an art district downtown, which I think is probably like, I mean, I don't live downtown, but every time I do go downtown to the arts district, I think that's one of the better areas to live. And Peter, maybe you could speak to that more.

SPEAKER_03: 19:43

Well, I think, yeah, you make a great point. And let's just go back to the concept that Kevin shared with us, which is that there is no real downtown yet. The city of Los Angeles is in the process of creating a real downtown and it is becoming a downtown with sport venues and different things that are being built out there, condos and markets and things like that. They're trying really, really hard to make LA the center, but here's the situation. And I think Roberto, you mentioned this, you used the word sprawling and that's exactly right. And we don't really have a metro public transportation system. We have nothing. So we are really reliant upon our cars. So people tend to want to live close to where they work, typically, to shorten the commute times. You get some wackos like me that live in Malibu. We spend 45 to an hour to get to work. It takes me that long every day to get to Beverly Hills, but typically, People want to, if their jobs are in Beverly Hills, they'll want to live somewhere in Beverly Hills if they're a job, which is interesting because it has created a huge housing shortage and probably an unaffordability for so many people. The values are getting so expensive and they're spreading out. And areas that maybe weren't expensive are becoming extremely expensive now because the prices in Bel Air and Beverly Hills and Brentwood and Palisades and Malibu are just going through the roof. I mean, you guys see it. We have so many sales. I mean, I just like to exaggerate, but it's true. We have so many sales over 100 million now. We've had sales over 200 million. And these are forcing people to move to neighborhoods and neighborhoods are evolving. And I guess the word gentrifying, I don't like using that word, but that's exactly what's happening, is going on and on. So that is, I think, a real challenge for our city in a sense that it's just becoming so expensive. I just want to touch on one thing real quick. It's a little bit of a commercial for California and LA. We get bashed a lot. You hear everyone's moving to Texas, everybody's moving to Florida, and you hear this all the time, and yet our population is growing. we're the fourth largest economy in the world behind USA. Think about this, USA, China, Germany, California, Japan. It's greater than Japan? Greater than Japan. I was gonna say you missed Japan. No, we are greater than Japan. And so I have this funny saying, don't mess with the bear. And LA is... still want to you know it's like manhattan it's i would call it the super bowl of real estate i would say your city may be the super bowl i think we're very close you know what i mean in terms of value and competitiveness and and and just the seriousness of that businesses in those two marketplaces i mean we're like london probably london la new york

SPEAKER_01: 22:57

but on top of that i think that when people come out here peter like also especially from manhattan like or San Francisco, I think they find a little more value in Los Angeles, even though we're expensive too. Especially in the rental market as well, because you get a lot more square footage compared to Manhattan and San Francisco. Parking is included. You have outdoor space, which is a lot harder to find in Manhattan. And I think a lot of times when I get people coming from, especially San Francisco and Manhattan, they're shocked that they get a little more bang for their buck than they do in those markets. So I just thought I'd share

SPEAKER_02: 23:43

that. We're talking a little bit about affordability. I mean, these fires that happened, obviously, decimated a tremendous amount of inventory. And I have to imagine that there is some extreme pressure on your city. I mean, your metrics have to show some sort of jolt that has happened with deal volume, inventory, and everything.

SPEAKER_04: 24:05

And yet he said there's 19 different cities that make up the city of Los Angeles. And that was just one of them, right? Well, no, not three.

SPEAKER_03: 24:14

Okay.

UNKNOWN: 24:15

Okay.

SPEAKER_03: 24:15

Nalibu is incorporated, so it's not officially an L.A. city, but it's an L.A. county, okay? Pacific Palisades is an L.A. city, and Altadena is an L.A. city. So the fires occurred in three areas. And there was about, I think, 12,000 structures burned, a lot of people misplaced, which has forced people to buy or rent in surrounding areas. And yes, it's holding up the values. And yes, our housing shortage is more severe now. No question about it.

SPEAKER_02: 24:51

So the majority of those people went to very close surrounding areas. They didn't go, you know, across town. You heard

SPEAKER_03: 24:59

about the person that went to New York or Europe or somewhere. You hear about those examples, but Kevin, you can talk to this. A lot of people came to Santa Monica, for example, a ton, right?

SPEAKER_01: 25:09

Yeah. I mean, Palisades, even though it is a very fancy A++ area and has a lot of wealth, it was a very diversified city. I mean, there were... people that inherited their parents' houses and could still afford to live in the Palisades who might not normally otherwise. So it was very diverse. I mean, there was a lot of wealth there, but also there was a lot of diversity. And I think that was one of the things that made the Palisades so great. There was just a mix of all sorts of people who lived there. But I mean, another thing that you... mentioned too uh i think roberta said that was like okay one structure burnt down let's just call one structure in the palisades burnt down it was a condominium building or an apartment building but there were 37 units in that building they counted that as one structure you know but now you have 37 families in that one structure that need to find housing and multiply that by all the other outside of the single family homes up there. There were tons of apartment buildings and condominiums. So there was just a rush of people that were in need to find housing and there's only so much housing we had. So I think a lot of people came to Santa Monica, Brentwood, Venice, a lot in Marina del Rey because there was a lot of housing available there. But I mean, there are some people that just spread out even farther.

SPEAKER_03: 26:34

Yeah. Go back to your map just for a second. I just want to make a comment. I mean, I think Altadena is going to have a complete Don't change from this one screen here. I'm just going to say that Altadena is going to have a huge makeover in Malibu. It's questionable about the buildability and whether we'll be building those lots on the beach because of the sea walls, pylons. There's a lot of issues that have to be addressed before I think any real construction is going to happen there. But the Palisades and Altadena is already under construction. There's already framing going up. People are starting to rebuild and lots of people are buying lots and it's all happening. i want to show you something can you dig into that i will in a minute but go back have the map a little bit different i want to show you something can you go closer i'll shrink it shrink it a little bit okay the palisades i'm going to show you like right there if you go to the left you have malibu if you go to the right on the coast side you have santa monica if you go east you have brentwood and westwood the palisades may be the the most perfectly located of any town on the west side because you have all these beautiful neighborhoods around you and you have ocean views from most of the palisades you got to think for a minute if you helicopter up it's not even helicopter let's let's let's jump on elon musk's space action go out and you look down you're gonna you're gonna say oh my gosh there has never been an opportunity like this in the history of real estate And so the people that own these lots don't sell. If you can't build, do anything you can to hold onto those lots, because they're gonna be so valuable. They may go down a little bit in the short term because people that have to sell are gonna maybe drive the prices down a little bit, but don't sell. And you have to imagine the sheiks in Dubai the oligarchs in Russia, the Blackstones of the world, just even the local smaller developers, and even just smaller homeowners. We've even heard one person that lost their lot here has bought seven more lots that lost their home. So my belief is this is gonna become, and I can't think of a better term. I mean, I think Aspen is the most expensive place in the country right now. I think it's gonna become the Aspen of LA.

SPEAKER_04: 28:54

Well, I was gonna ask that follow-up question, which is, is... Everybody at the municipal level and the speculators, everybody is excited about the redevelopment of the Palisades. And I think the government said, whoa, whoa, wait a minute. We have an opportunity, but we have to get this right. So there was a slowdown. There's a slowdown inclination. And yet there's a lot of people who are saying, I can't slow down forever. I need to rebuild. So Are people able to rebuild? Has the government figured out? What do you think, Kevin? I mean, I have my thoughts. Go ahead,

SPEAKER_03: 29:29

Kevin, and then I'll give you my thoughts.

SPEAKER_01: 29:33

I mean, I think when you include the government in things, it always becomes a mess. You know, it's always gonna become a mess. I mean, I think sadly on some level, all the diversity of the Palisades is gonna be lost and it is gonna be more like Aspen, but it's gonna be absolutely gorgeous. But I think one of the charming things about the Palisades I don't think we'll be able to come back because there'll be so many people there who can't build. But hopefully they'll be able to sell their lots at some sort of profit. But it's just going to change. And you know what? Change is uncomfortable and change sucks. And Peter and I talk about it all the time. We just have to get used to it and take a deep breath. But it's not going to be what it was, but it's going to be something wonderful when it happens. But I think it's going to be a while.

SPEAKER_02: 30:20

Why

SPEAKER_01: 30:21

is

SPEAKER_04: 30:21

it different than Naples getting whacked by a hurricane and they bounce back within two, three years? Or Sanibel, the island in the Gulf of

SPEAKER_03: 30:31

Mexico? California is a much more environmentally concerned area. It's a much more people rights, I think, and making sure there's housing for people that maybe can't afford a$10 million house. Or even a... a$2 million house. So I think everybody is looking at it like, hey, how are we going to make sure that it's not a lot of toxins left over? How are we going to protect the environment? How are we going to, like Kevin, deal with the diversity of the neighborhood and all that? So those, I mean, in many ways, a lot of people would say California is too liberal. In many other ways, we're kind of leading the conversation and things that need to be talked about. And I think that it's, like Kevin says, it's a mess because it's a It's a juxtaposition of both. So you have people on both sides of the fence. Some people that would say all salt and some people that would say all pepper. And so there's a little bit of a conversation going there. But that being said, the pressure on Mayor Bass and Governor Newsom is tremendous. Too many people's lives incomes their their their worth their net worth is tied up in this real estate that they own and that goes for the person that inherited it that didn't have enough insurance and it goes for the very very wealthy person too so everybody there has a real financial interest in this getting rebuilt and and and maximizing returns for everybody that owns property there because their lives depend upon it so i think i think there's going to be a lot more flexibility and a lot more uh bureaucracy removed

SPEAKER_04: 32:08

if i show up with 10 million dollars and i say kevin can you find me a place in the palisades i want to be part i believe that peter is right it's the next aspen i want in can can i or is it wait do i have to wait for the government to

SPEAKER_01: 32:22

just make some decisions i mean you can absolutely buy some lots right now there are a ton of lots for sale but um you know, they're claiming that the red tape is going to be removed. And as long as you don't build something bigger than the square footage you already had, they're going to streamline it. I mean, they have one, they show a lot on the local news that this one couple is already framing their house up there. And I think it's a Thomas James house. But again, I mean, what they're not really saying is that that couple had just finished building their house like a few months before. So it was a brand new house, maybe like four months before, and then it burned down. So they had everything approved for that previous house and they're building the exact same house. But you see that sort of on the local news more than sort of like just sort of a lot of the, regular people that might have had a house that was built in 1960 or 1980 or whenever that house was built. And the mess is, I mean, the cleanup is really the issue because we are environmentally friendly state. And also everyone's panicked about going back there with all the lead and the asbestos from the old houses and all the cars that melted and all that other stuff you can only imagine just getting out of there. So I think that is the thing that's gonna take the most time initially.

SPEAKER_02: 33:50

But for it to become and to manifest something like an Aspen, which I think would be extraordinary, to have a consensus, a uniform consensus or a master plan to make that happen, is that plausible? Well, here's what's happening to your point.

SPEAKER_03: 34:09

And that's probably not plausible 100%, but it is plausible in smaller fractions of the community because people are joining hands and are hiring the same architect and the same builder and creating like five different designs, for example, for homes with five different kind of, almost like a new dev to expedite the approval process and to decrease costs and to do all these things. So there are a few developers out there right now that are soliciting homeowners to join hands and to do this together. So good idea and good thought because that is happening and such. So that's going to definitely speed it up. We have actually a case study in our own office here in Beverly Hills. We have an agent that lost her home there. And I don't know if If she's started rebuilding yet, Kevin, Patty Best and Peter Best, I think they've broken ground and have actually started rebuilding. They got theirs approved right away, but they jumped on it and were super professional about how quickly they worked through Citi. There's a local developer named Rick Caruso. who you know is running probably going to run for governor or mayor or something he's very active in politics and he developed the palisades village which is a really nice little development they did in the palisades and he was a collaborator he got the whole town to help him design his project and and pretty popular guy he he is actually implementing ai to expedite the process for the for the whole uh building thing i'm not sure kevin maybe you could explain a little bit how that works but somehow our number with use of artificial intelligence is going to uh expedite the permit process

SPEAKER_01: 35:54

Well, I'll just also say that like the Palisades is this beautiful luxury area overlook, you know, like with so many areas having ocean views and, you know, eventually it's going to be like the newest city in Los Angeles. I mean, almost every structure was burnt down there. I mean, imagine this luxurious city, but everything's brand, brand new. And I mean, that's gonna be a very valuable assets for all those owners and people that want to live in a city with like the newest and the best properties.

SPEAKER_03: 36:31

Yeah. It's pretty hard to look at though. I mean, I was gonna talk about that as a real estate advisor, why get in here, buy now, you know, if you own land, don't sell, try and build, but hold on as a worst case scenario because your property is gonna become valuable. But then to Kevin's point, I realized how tone deaf that was, because so many people were hurting and you drive through and you just see the, I don't know, the World War II vibe. Like the place was just bombed. I mean, I don't know if you've ever visited a country that's just been bombed. I never have. I mean, you see pictures, but to see pictures and then to actually be in that environment is so different. And I can tell you that I was driving through and I said, I'm not going to do a social media post on this. you know, at that moment, I think it's okay now, but at that moment that Palisades is gonna be the next Aspen, I mean, that would be so tone deaf and so wrong that, you know, I mean, it's true. It's gonna be, it's the reality, but you just, you know, there needed to be some mourning and grieving. And when I drive by my elementary school that was burned down and my church that's burned down and every house I lived in in the Palisades burned down, it made me pause, you know, and just realize, know how precious life is and how sacred life is and you know and and then you go to the place like in every one of these you know burned out structures there were families and kids and teddy bears and memories and memories and and and photographs that they didn't get away with i mean and and memories too right you don't lose your memories but you lose some of those artifacts right so the the the the There's never been anything in my life like that. I guess if you live in some of these areas where there's hurricanes and tornadoes and different things, I guess it's similar devastation. But boy, for us, Kevin, that was a first.

SPEAKER_01: 38:34

Sorry, John. I think it's still permeating our city. There's still a lot of emotions about it. I find that like on a daily basis, even with all the people I work with, I have to take that into consideration because it just didn't go away because it's six months later, you know? And I think we as realtors here in Los Angeles really like, You know, I have a lot of feelings about it, but I also know that all the people, most of the people I work with have feelings about it. And not just the ones who've lost their properties, which there are so many of that I've worked with, but also just everyone. There's sort of this sort of cloud and to be, I try to be like very sensitive and intuitive about those feelings because they're there, you know? I drive

SPEAKER_03: 39:29

every day from the west end of Malibu. And west end is the north end, if you don't know the terminology. And so I come down the coast and starting at about where our old Malibu office was, which is Carbon Beach, all the way to Topanga, 95% of the homes are burned down on the beach. And we're talking about, you know, all these structures that have been there for years, all these iconic homes, and then, you know, shacks and different types of homes, all the old Malibu beach shacks that probably should have gotten burned down in some ways, you know, they were, they were ready to fall down anyways. But when I drive down now, and this is like some of my thoughts I have, like, first of all, I'm looking at the cleanup, Kevin. And there's, I think on the biggest day I counted 65 people. I mean, there was, more backhoes and more stuff around and cranes and all stuff but there was 65 people that i counted and could see to clean up a 500 home mess and i'm thinking that's not going to happen very fast and then as i'm driving down further i'm looking and i'm seeing you know the burned out cars and then but the most striking thing was i could see the coastline for the first time in my life because the houses aren't there now i'm driving down and i'm seeing this beautiful coastline all the way down and i'm thinking to myself are they gonna like My head goes to, are they going to do eminent domain and just buy all these lots and just keep it as a- Like a Riviera. A view corridor, more beach for the public to access. The amount of work that needs to happen on those Malibu lots, don't forget it's septics. All those septic tanks would have to be removed and somehow replaced either with new septic tanks or a sewer system, which would be so expensive it's ridiculous because you can't let the tanks spill out and go into the ocean then you've got all that debris you've got sea walls you've got pilings that have to get removed and changed and everything and upgraded and all that and then in

SPEAKER_02: 41:33

many of those areas earthquake because you guys deal with earthquakes has to be very resilient

SPEAKER_03: 41:40

yeah that is a consideration as well so I think Malibu is actually that part of the coast. The rest of Malibu is fine, but that part of the coast is really in a whole lot of hurt.

SPEAKER_04: 41:54

Wouldn't

SPEAKER_03: 41:55

you say, Kevin?

SPEAKER_04: 41:55

I want to pull the lens back on you. I mean, not to be negative, but I'm

SPEAKER_01: 41:59

just very concerned. Does anyone want to come here and live with us? We have the best mudslides. We have the best earthquakes. We have the best fires. We have the best riots, so come on down. That's funny. We do

SPEAKER_03: 42:13

have the

SPEAKER_01: 42:13

best

SPEAKER_03: 42:13

weather.

SPEAKER_04: 42:14

Let's talk about LA generally, because that represents a devastation, but in three of the, say, 19 neighborhoods. I want to talk about the fact that since COVID, we've seen some boom neighborhoods like Austin that have since cooled, corrected. We've seen some that have boomed and have not corrected, and we're expecting Maybe a correction to occur. Maybe Palm Beach might be in that category. You know, is is Palm Beach going to go the way of an Austin? But New York has still not hit the highs. L.A. are not. These are two markets, L.A. and New York, that didn't boom as a result of covid. They've been pretty level or did they boom? Talk to me about the L.A. market generally since covid.

SPEAKER_03: 43:06

I would say boom.

SPEAKER_04: 43:07

It has

SPEAKER_03: 43:08

boomed.

SPEAKER_04: 43:08

Boom. I would say

SPEAKER_03: 43:09

boom. It is. Yeah. It's gone up so much.

SPEAKER_04: 43:12

Has there been a correction?

SPEAKER_03: 43:15

No. I would say that it's not booming anymore. I would say that, I would say, I wouldn't even say it's flat. I would say it's appreciating like it may be like under 5% a year at the moment. But I wouldn't say it's going down. But I think the mindset of the sellers is it's still going up at the same rate it was. And so they're listing higher than they should.

SPEAKER_04: 43:36

Is that a result of the economy and jobs? Is that a result of, what is that a result of?

SPEAKER_03: 43:45

I think it's a result of, I think number one is you have buyers that want to move, want to change houses, and you have buyers that need to. The buyers that want to may be sitting in a house with a 2.5% interest rate, You know, they're watching the gyrations of the economy right now and all of the, you know, we have tariffs, we don't have tariffs. You know, it's a little bit kind of bumpy. And so they may be just saying, I want to, but maybe now it's not the right time. We have a really good interest rate. Let's see if interest rates come down a little bit, something like that. So I think interest rates is a factor.

SPEAKER_01: 44:20

I think it's the biggest factor right now, it seems like.

SPEAKER_04: 44:23

I also think uncertainty surrounding Hollywood has got to be weighing. I know that we had the strike and then since the strike, the Hollywood studios have not revved up on their production. like it was a few years ago. And my daughter, a 27-year-old out there, a 27-year-old editor, is wondering, after getting four years of very busy from Netflix and Warner Brothers and Disney and Fox, all of a sudden there's a lot less work, and I know that community is nervous. So I think that's also a factor on why maybe it's not growing as fast as it was.

SPEAKER_02: 45:03

But is that industry not partially contracting because of AI?

SPEAKER_03: 45:09

I think Mayor Bass is starting to react to that and she's already implemented some cost savings to film and la and to film in california and she i mean well not california she can't affect that but in la she's already um made it more effective for so that studios don't have to film everywhere else now that was the big thing they were driving them out of la because it was just cost prohibitive

SPEAKER_01: 45:29

it was just too expensive i mean we were pushing everyone out where like a permit cost seven thousand dollars here in la and would cost 700 in atlanta and every city in every state wants that film business and we weren't we weren't making it easier, we were making it harder. And I hope she does something for that.

SPEAKER_03: 45:50

Well, she did do something already. And so that is, so I think more of that more business friendly kind of attitude, I think is gonna help us a lot for sure. But for the homes in general, I think it's interest rates. I also think the ULA tax didn't help us. And she said she would repeal that today if she could, but that's gonna have to go on the ballot and be voted out. uh because it was voted in so she can't just repeal it um so that's one thing that i think it is and i think for the state of california too the the capital gains is high um you know we have a 25 you know capital gains tax so i think a lot of people aren't selling because of that so what's happening is is all these homes are just being passed through generations and being passed down to kids and and things like that's going on so Has

SPEAKER_04: 46:40

the addition of ADUs been a major factor to benefit, say, the housing shortage? I don't know. What do you think, Kevin?

SPEAKER_03: 46:47

Not that much, would you say?

SPEAKER_01: 46:48

I don't think so. I think they streamline the permit process, but even though I have a lot of owners who have added ADUs to their properties, I think at the end of the day, I don't think it's helped with housing because they're still expensive, these ADUs, for most of them. But... I know we've talked about a lot of negative things. I just wanna say, even with the earthquakes and the fires and the mudslides and the interest rates and the tariffs, it seems to me historically, we are one of the greatest place on earth to park and invest your money. And people come from all over the world to Los Angeles, to all these different cities in Los Angeles because of our weather. And I think no matter what, there's always going to be people coming here from different parts of the country, from different parts of the world. And this, the real estate will always grow as long as you hold onto it long enough. And I think, I mean, I see it all the time of, of all, like from every country you can imagine and every city you can imagine, people are always taking jobs here and coming here for whatever reasons, you know. I mean,

SPEAKER_03: 48:04

it's so funny, like living in Malibu, most of my life and going through all the fires I have. Six months later, it's like nobody remembers. It's really pretty wild. And everyone comes back. I mean, we're extremely resilient. We have the Olympics coming, which again is going to put a ton of pressure on getting this back in order and in shape. Like I said, we have probably, next to New York, the best jobs on the planet. So for high paying jobs, LA is, I think, number two to New York in that in the country.

SPEAKER_04: 48:39

What are the major industries that are driving the housing market now, besides Hollywood?

SPEAKER_03: 48:45

IT, tech. Yeah, IT. Service. Anybody that's in service, like attorneys and accountants and things like that. else do we have really good we have very strong agriculture and i know that sounds interesting but a lot of you know in la really well not in la but there's a lot of wealthy people in bakersfield bakersfield that will buy in you know la or you know some of the surrounding markets like uh you know santa barbara oxnard and there and there we're talking you know very very very wealthy um what else do we have really strong in I think those are our major industries. What do you think, Kevin?

SPEAKER_01: 49:22

No, I mean, it's the entertainment and tech. Yeah,

SPEAKER_03: 49:25

period.

SPEAKER_01: 49:26

Those are always the driving industries here. And those two work together.

SPEAKER_03: 49:30

And the real estate industry, obviously. How's your rental market?

SPEAKER_01: 49:38

I mean, I can talk to that because I'm the number one guy in the state of California, Douglas Elliman, in rentals.

SPEAKER_03: 49:46

That's right, you are.

SPEAKER_01: 49:47

I do a ton of rentals and it's very brisk and it was always brisk. There was, of course, a huge demand after the fires. But what I'm seeing right now is what I call like the shuffling effect, because it's been a certain amount of months. People that needed places, you know, who lost their properties and homes, like were panicked and took the first place they could. And not the ones who were able to buy another place, but the people that were renting and their insurance was covering it. And now they've been there for a certain amount of time in whatever place they rented. And a lot of owners were accommodating to six month leases at the time when normally we didn't do that. And now I think they're at, a place where they realize how long it's going to take for them to rebuild their property or if they're they are or they aren't going to rebuild their property or whatever those personal decisions are there's this shuffling going on right now where someone's like okay this is going to take me two or three more years i can't stay in this two bed two bath i need a three bed and two bath i need more outdoor space i need i want to be somewhere you know, more rural. I don't know. Like I'm noticing all the shuffling going on right now. And, and a lot of it, I think our people are fire victims because they realize it's going to the longterm of where they need to be. And they need, they want to find something better and bright for them for that time period.

SPEAKER_02: 51:23

Are you at peak pricing?

SPEAKER_01: 51:26

No, we were got, we got a little soft. You know, we're not, were still very expensive but we kind of sort of were steady like and plus we had all these anti-gouging laws which were great laws that you couldn't increase a property's price more than 10 percent and it was to protect all these people from getting ripped off and it was it was good but uh it also it kind of kept the the rents pretty steady um as well so i'm not seeing

SPEAKER_04: 52:01

Can you be more specific? If I've got a million and a half dollar house, is that a$12,000 rental?

SPEAKER_01: 52:08

Well, let me say this. So like an average two bed, two bath rental in the nice area of Santa Monica, which was going for like$5,500 to$6,500. is is staying there like when the tenants are moving out we're not going to 67 50 or 7 000 or the 55 is not going to 57 or or 6 000. it's pretty steady it's still a good income coming in for the owners but we're not it's it's it's not a i'm noticing it's not a big jump right now

SPEAKER_04: 52:47

for that 6 500 rental two bedroom two bath rental what would it cost me to buy that in santa monica

SPEAKER_01: 52:56

I'd say maybe in the 1.5 range, maybe 1.7. It just depends on condition and what it has to offer. How

SPEAKER_04: 53:07

does that compare? Roberto, I'm guessing that the rent in New York on that million and a half dollar apartment is going to be higher than 65, a lot higher. New York rents are going through the roof.

SPEAKER_02: 53:20

We peaked a month ago. It actually slightly dipped, which was wild. But I anticipate that we're going to be hitting all time highs. I mean, one bed, for example, last year I rented a one bedroom, one bedroom for, it went on the market. It was someone who wanted to buy the apartment. And they said to the buyer, look, we haven't sold this and we're going to rent it. We're going to list it on Sunday. You know, so you have a couple of days. And sure enough, my clients didn't decide until Tuesday. And when Tuesday came, I had asked him, what are you going to try to get for it? He said,$5,000. On Tuesday, he said, we rented it, like I told you. And I said, what'd you get? He said,$5,900. It's a one-bedroom. My

SPEAKER_04: 54:04

daughter in a$5,000 rental is being asked for a 10% hike. All my nieces and nephews in New York are all looking at 10% hikes year over year. And they're all thinking about, you know, can I negotiate that down? And there's not much negotiability on these$5,000 rentals in New York City. Because

SPEAKER_02: 54:23

there's so much demand. I mean, I will walk down the street tonight and randomly I'll see a bunch of people outside. I'm like, what's going on there? And I realize they're about to show an apartment for the first time.

SPEAKER_01: 54:34

And that's one of the things I said about when people come out here, even though we're expensive, I think you get a little more. And it's not as insanely competitive as it is in Manhattan.

SPEAKER_04: 54:46

In one of these neighborhoods, how many listings? I'm in a town of 7,000 households, 20,000 population. There's 30 houses on the market. It's a 20-year low on inventory. What's the same thing in Santa Monica or any of these neighborhoods that you're referring to? Low

SPEAKER_01: 55:07

inventory? Yeah. And I think it also speaks to what Peter said, where we got these incredibly wonderful interest rates during COVID, and it's hard to let go of those. And it's really hard to let go because you're going to get... half of what you know like you'll be paying the same thing for half of what you have effectively you know if you were to sell unless you had you know unless you were leaving the state or going somewhere else so

SPEAKER_03: 55:38

you could yeah so my seller beware is twofold because we've seen some sellers that maybe got a great offer on their property and they took advantage of it and they thought maybe i'll buy down or whatever And then we've also had people that have sold their properties to maybe move out of state only to find out they don't like the winners. And so in both cases, I have really good friends that sold their house. They got almost 15 million for it. And they literally have been looking for a new house for, I think it's five years now. And during that time, the prices have gone up and up and up and up, and they can't find anything they like.

SPEAKER_04: 56:24

I have a five-year client, same thing.

SPEAKER_03: 56:26

And I have another friend that sold their house and moved out of state, decided they don't like it. They want to move back and they're going to be renters. They're not going to be buyers. They're not as wealthy, you know, and since they sold their house and moved, the values have gone up so much that they can't buy back in. So I always tell you, you know, like, like, make sure if you're going to sell something, buy something, you know, don't, don't get out of the game. And I'm sure it's like that in New York and other hot markets, but in California, for sure, you know, you do not want to be uninvested in this state. That's for darn sure.

SPEAKER_04: 57:06

All right. I want to thank my sponsors and then come back to you for one, for a closing thought. I want one great outrageous prediction for the LA market from each of you. All right. So. This has been Burrows and Burbs. You'll find us at burrowsandburbs.com. And last week, we had the Chinese market complex investing, apartment complex investing week before that. And we'll have this show up within an hour on burrowsandburbs.com. I want to thank Grace Farms, gracefarms.org, 80 Acres. And their mission is sustainability. And check out the programming at gracefarms.org. I want to thank Peter Hernandez. You'll find him at Elliman.com, Peter Hernandez. And I want to thank Kevin, Kevin Krakauer, the number one rental agent in the state of California. And I want to thank my co-host, Roberto Cabrera. You'll find him at Brown Harris Stevens, BHSUSA.com. And that's me also at Elliman out here in Connecticut. Thank you, gentlemen, so much. Final thoughts, parting words of wisdom.

SPEAKER_03: 58:23

Peter. Okay, Kevin. Go, Kevin.

SPEAKER_01: 58:27

This is my parting words of wisdom. Thank you, Roberto. Thank you, John. When you guys come out here, I will take you in Santa Monica to the best non-fat, farm-to-table, non-GMO, fat-free, fair-trade almond milk latte that you've ever had. And then you'll really feel the spirit of the West Side beach life.

SPEAKER_04: 58:52

That's right. We didn't even talk about the food. The food out there is phenomenal.

SPEAKER_03: 58:57

We have really good food, yeah. So I would just say, Watch for LA Strong. Watch us come back. Watch the rebuild. Watch the regrowth. Watch us host the Olympics. Watch entertainment thrive in our city. You know what I mean? Just, we're LA Strong. And as I always say, don't mess with the bear.

SPEAKER_04: 59:24

What's up? I'm convinced. I was kind of down on California before the hour, but you know what? California's got a lot going for it. And I think once you get past a few things like the bureaucracy, I think there's going to be nothing holding you back. So, yeah. And you have Peter and I, John. Yeah.

SPEAKER_01: 59:46

We're your homies now.

SPEAKER_03: 59:47

That's right. I love it. Thanks for having us on. Thank

SPEAKER_01: 59:52

you, guys.

SPEAKER_03: 59:52

Bye, guys. Thank you. Bye, Kevin. Good to see you.

SPEAKER_04: 59:55

Love you, Peter.