Los Angeles is experiencing a mansion surplus. Strong demand for high-end single-family homes spurred a frenzy of new construction projects. Now, those projects are sitting on the market, causing a surplus of high-priced homes. The exact cause of the surplus is under debate among L.A.'s leading luxury brokers.

“If you ask 10 different luxury brokers in the Los Angeles market, you are likely to come up with 10 different answers,” Yin Ho, an associate in the real estate team of international law firm Withers, tells GlobeSt.com. “However, the general consensus is that within the past decade, apart from New York City, Los Angeles has emerged as the primary U.S. market for domestic and international luxury real estate buyers.  From a global perspective, Los Angeles is seen as a safe and attractive market due to its status as one of the top-two “gateway” cities in California and the West Coast.  This is fueled by the fact that Los Angeles supports a diverse population and economy, top tier universities, and geographic proximity to China and Asia.”

While developers were certainly zealous in their response to the demand for luxury homes, Ho says that the cyclical nature of the real estate industry has contributed to the surplus. “The new crop of luxury spec homes and mansions is an optimistic response by developers seeking to profit from buyer demands,” says Ho. “What has led to the actual surplus, however, is the trend-driven aspect of the real estate industry.  Once a market has been established and validated—validation occurred following record-breaking sales of luxury real estate in the past five years—the industry moves quickly fulfill that market even perhaps, to a point where the market can no longer absorb the demand.”