It’s a long train and a longer tunnel
For those watching local real estate values, it’s a frequent question: “After we’ve suffered through all that we have, when will there be light visible at the end of the tunnel?” There is no better metaphor to describe the journey of ups and downs-well, downs-of the Malibu market.
Actually, there is light visible at the end of the tunnel! For a specific portion of the local market, the darkness is turning to bright light. In keeping with the metaphor, the very front of the train is just about to exit the tunnel.
The place where values have bottomed and begun to increase: low-priced Malibu condos.
The lowest bottom of a very tall real estate price ladder is also the beginning of a very long train. In 2008, when the rest of the Malibu market was thriving, it was the entry door of the market-the lowest-priced two-bedroom condos, then at about $575,000-that first felt cold darkness. Even as houses sold briskly, condo sales stalled.
The same low-end, 2-bedroom condo has been more in the range of $340,000 lately, but that price is almost impossible to find anymore. In the last two years, about 25 Malibu condos sold for less than $400,000; at this writing, only two condos in all of Malibu are listed for under $400k. (Both are in the high 300s). Meanwhile, three others have been reported in escrow. Only four other units have closed escrow below $400k in the past six months. For those anxious to read good news, here it is! The low end condo market has turned hot.
Units with an asking price of $400,000 – $500,000? Of the 15 such listings in the past six months, 14 have sold or are in escrow! Only one, at this writing, is available.
No other segment can boast such results, obviously tied to lending availability and affordability factors.
The next section of the train is also seeing light. Low-end single-family homes are feeling a better market, also. Twenty-eight homes are listed at this time in the 90265 ZIP code for under $1 million-but 11 are in escrow. Another market segment recovering! The very lowest homes for sale have essentially bottomed in value and are on the verge of inching upward.
Now back to that tunnel. It has been a lengthy one. Malibu actually had a respite from the national real estate collapse during 2008 when prices went up, locally. The train had entered the tunnel, but buyers were focusing at the light behind them rather than the darkness in front.
Obviously, since then it has been unpredictably long in length and absolutely more severe in value destruction than anyone imagined. Annual sales over the past four years have averaged about 150 home units in Malibu, not nearly enough to sustain previous values. (That is, the sales pace has been inadequate unless the inventory also stayed very low, which it has not). Whereas the joyous 2003-2005 years saw the tally of Malibu home listings below the 150 level, it bloated to more than 300 this past summer. Thus, inevitable price drops, now in the 40-45 percent range from the peak, have resulted.
Each price tier reveals, as 2011 comes to a close, more challenging selling conditions:
€ Between $1-$2 million this year, there were 60 sales; 50 are currently listed.
€ Between $2-$3 million this year, there were 25 sales; 47 are listed.
€ Between $3-$5 million, there were 20 sales; 46 are listed.
The supply/demand dynamics get worse the higher you go.
For properties listed at more than $5 million there have been 19 sales recorded, with 105 properties on the market. Talk about being in a dark, narrow place.
As seen time and again, the different price tiers follow each other’s trends. As previously described, when things were getting worse, it happened first for the low-end condos (in early 2008). This year has seen the upper end suffering most. Another way to describe that upper end (properties worth more than $5 million): the end of the train. The last into the tunnel, the last out. Only when the $1 million marketplace begins thriving again will the $2 million market have hope, and so on.
How fast the train gets out of the tunnel depends greatly on the lender market, and interest rates. The system has required an overhaul to a nearly all-cash marketplace. Meanwhile, Malibu real estate remains made up of many micro-markets.
The activity in $1.3 million Malibu West has no more connection to $6 million La Costa Beach than Agoura has to Bel Air. At least this can be said about current times: It is more encouraging than 18 months ago when all of Malibu’s micro-market box cars were deep in the mountain, the light faded from the rear and imperceptible ahead, scant few sales and way too many sellers at every price.
Not far down the tracks, particularly for lower-priced investment-seekers, comes the next real estate phenomenon: all those buyers who grew comfortable standing on the platform, not realizing the choo-choo left the station.
Rick Wallace has been a Realtor in Malibu for 24 years.