Are we in Victorville yet?
The theme of many recent sour real estate reports highlights the crisis in the sub-prime lending market. It was not a surprise, after several years of drastically looser standards upon which financial institutions made lending decisions, that many borrowers could not afford adjustments in the interest rates and payments that a gimmick-laden industry thrived upon between 2002-2005. Though far from epic proportions, increasing foreclosures are the leading batch of bad news and projections.
Has it had any effect on Malibu?
By several ways of answering, the reply remains “no.”
First, relatively few purchases here, during the spirited years in question, relied upon “live for today, pay tomorrow” financing and Malibu has remained almost devoid of foreclosure listings and sales. Not to say that some Malibu houses have hit the market-and sold-below previous benchmarks. But Malibu remains physically and figuratively far from the outlying areas of Lancaster, Victorville, Hemet and other fast-growing environs where first-time buyers entered the pipeline of home ownership under questionable qualifications.
Aren’t fewer move-up buyers entering Malibu and causing prices to drop?
That answer is yes, and no. Fewer buyers are entering Malibu-sales have dramatically decreased in past 18 months-but prices have not dropped. The reason is that the inventory of homes for sale remains very low. Fewer buyers are meeting few sellers and prices are in a virtual standoff.
After 1,200 home sales occurred between 2002 -2005, a tally of dizzying impact in a city of this size, it’s as though the aggregate population has said, “Okay, I am here, and I am not moving.” Generally, only about 4 percent to 5 percent of the homes in Malibu have been listed for sale during this slowdown, so even as a thinning caravan of buyers peruses Malibu’s inventory, the low-balling, bank “short-pay” and desperate seller characteristics of San Bernardino and Temecula elude Malibu.
While sub-prime financing woes have little affect on Malibu, normal financing woes are being felt. Listings between $1 million and $4 million have a cavalcade of price reductions in the current market, still some from ridiculous prices that originated out of the 2004 ask-anything mentality. In this vital “low-end Malibu” market, a battle for buyers is waged and the culprit found for Malibu’s real estate black mark: Fewer than 200 people bought homes last year and it could be less this year, based on the first four months. Sales and volume are distinctly down; not price averages, but the rate of business is definitely slow.
That might be enough to cast Malibu into the pot of ailing real estate markets but for one last factor-sales of high-end properties are terrific. Sales above $5 million are brisk. Some buyers with money to burn can’t find what they want in a lean selection. And thus, despite a weak underbelly, Malibu is a mixed market with some notably good trends.
Some of the statistical facts behind the analysis:
€ The typical spring flurry of new listings and increased inventory has not transpired. About 175 homes are listed for sale in Malibu/90265. During 2006, the number went up from 128 in January to 211 in August, and back down to 150 in December.
€ Sales through April totaled about 50, a severely low number. From 1998 to 2004, six of the seven years saw 300 sales in Malibu for each full year. Last year the score plummeted to about 175.
€ The median this year has floated around the $3 million to $3.1 million range after last year, finishing at $2.8 million. It was at $2.1 million in the boom year 2004, increasing to $2.5 million in 2005. It keeps going up. The average sales price, topping $4 million last year, is above $5 million so far this year, thanks to many disproportionately large sales prices.
€ Malibu’s new record sale price of $38 million was established recently on a bluff top Point Dume property after setting a record last year in Serra Retreat. One out of seven closed Malibu sales this year have been above $10 million.
Is it healthier overall to have a strong high-end or strong low-end?
That may depend on which is more influential on the future. If Malibu retains special status to draw elite investment monies, it may never matter what is happening in far away, entry-level bastions of development. Far more important may be the economy in general, and interest rates. Future issues may be about the pull-back of big money, but much busier times at the low end, with more sales among downward adjusted prices and averages.
Malibu values have seen boom times not just from 2002-2005, but from 1974-1979, 1985-1989 and other periods as well. Another one will come. If the trip from the recent boom to the next could be described as a trip from the glitter of Los Angeles to the lights of Las Vegas, halfway, indeed, is a potty stop in Victorville. There is an inevitable phase of downward pressure, and a period of hopeless horizon before the next riches. This Malibu market may be taking that drive; unless it’s making the trip by private jet.
Rick Wallace of the Coldwell Banker company has been a Realtor in Malibu for 19 years. He can be reached at his Web site, www.RICKMALIBUrealestate.com