As Malibu prepared for incorporation in 1991, optimism held for greater increases in property values. It was not to be.
The average sale price of a home hovered at just more than $1.3 million during 1991, but sales fell off dramatically. The sales results of ’91 portended a local real estate market that would drop off the map and bring the local industry into a near depression.
The average price 10 years later is 33 percent higher, at more than $1.7 million, but the ride to current levels began in 1991 as a roller coaster ride with the scary part first.
The incorporation of Malibu had a negative influence on Malibu real estate prices in two particular ways.
First, in anticipation of a new city government that was assumed to be unfriendly to new construction and expansion, many home building projects were rushed through county approvals in the months preceding the March incorporation. As a result, while buyer demand was declining, new homes glutted the market and forced prices down.
Secondly, the new city council immediately instituted a building moratorium and other restrictive measures that made property in Malibu less useful, and thus less valuable. Within three years after incorporation, raw land values sank by as much as 60 percent. Though the supply of homes was limited, the underlying land component was reduced so greatly that overall values diminished. The cost of fighting local bureaucracy, a problem that remains to this day, further subtracted from local values.
Within a few years, hundreds of local homeowners owed more on their mortgage than their property was worth. Dozens of longtime residents fled Malibu, forced out by foreclosure.
The median average of a Malibu home in 1991 was $925,000. By 1995, it was $680,000. The market had fallen more than 25 percent.
The new city council was not entirely to blame for Malibu’s plummeting real estate values. Southern California’s economy was weakening overall in 1991, led by reductions in the defense industry after the Cold War ended. Rioting in the wake of the Rodney King verdict cast a further pall on Southland real estate.
The market, similarly to today’s, may have been due for a “correction” after the blitz of the late ’80s. Nobody could have predicted, however, beginning in 1991, that the market would experience its worst decline in history. At its lowest point, one-third of Malibu home sales was foreclosures and an additional number were sold with short payoffs to the bank, a new concept whereby lenders agreed to allow homes to be sold and accepted less than they were owed.
The downward momentum changed in 1997. The median average rose above $700,000 that year, and broke $1 million in 1999. Last year, it went to $1,250,000.
Several homes that were for sale in 1991 have been listed or sold again in recent months. Here’s a look at their market history through the years.
A home at the top of Malibu Country Estates was listed for just under $1 million in the summer of ’91. It had three bedrooms and an ocean view. It sold the next year at $890,000. The same home sold again in ’96 for $735,000. Recently, it was listed at $1,125,000.
On 55 feet of Las Flores Beach, one of the nicer beach homes in the neighborhood was listed 10 years ago for just under $4 million. The home remained on the market for most of the decade. It finally sold last year for $2,750,000, a high for that beach.
A Point Dume home, with a small lot but nice ocean views, was listed for $835,000. It finally sold in 1994 for about $500,000. The house and property were completely redone and had brief market exposure recently at roughly $1.5 million.
Several new homes on Ramirez Mesa behind the Malibu Villas were listed in the $2.5 million range. None sold for even close to that. Through 1997, the most any sold for was $1.5 million; to date, none has passed $2 million.
Rick Wallace of the Coldwell Banker company has been a Malibu Realtor for 13 years. He can be reached at RICKMALIBUrealestate.com.