Prices holding steady, so far.
By Rick Wallace / Special to The Malibu Times
The final period of this year’s real estate transactions is approaching and the sales game may already be lost.
Entering the final quarter of the calendar, only about 133 homes have sold in Malibu through the first nine months of the year. With fewer than 200 sales a virtual certainty, 2006 already registers as the slowest year in real estate locally in more than 10 years.
About 170 escrows are projected to close this year. More than 240 homes in the 90265 zip code area sold each year for the past eight straight years. This year’s tally will be about 33 percent less than last year – and barely half the sums from years 2002-2004.
After record sales volume reached $950 million last year for single-family homes in the Malibu area, about $640 million is projected for this year.
The most remarkable and positive feature of current statistics is that prices have not yet shown any decrease. An early-year trend to a higher median than last year’s $2.5 million median home price has held through September. The median sale price (the point at which half the sales have been higher and half have been lower) of the 133 sales this year is currently at $2,775,000-an 11 percent increase.
The realty market has this dichotomy: While significantly fewer buyers have been willing to take the plunge for their new Malibu estate, those who did bought with gusto. The average sale price of 252 sales last year was $3,772,000. The average this year is virtually identical: $3,775,000. Some super-high sales combined with a slow down in the lower price ranges have kept prices firm, statistically.
More visibly, however, asking prices are in fast decline. A home that sold for $3 million a year ago may have gone on the market at $4 million early this year, as an example. Such a home would be in its fourth price reduction by now, down to perhaps $3.3 million, getting few showings and hoping for a little profit from a year ago. That is the greater reality.
The combination of fewer buyers and the fast rise of inventory levels is a certain recipe for lower prices.
Not just yet, apparently.
It may be a testament to the incredible power and strength of the previous market that its momentum prevails. The transition from a marketplace as hot as could possibly be to a more normal landscape has been psychological torment. But the underlying property values have been, so far, unshaken.
More on the inventory.
Coming from an extraordinary time of practically non-existence, the number of homes in 90265 for sale has risen from about 100 to 200, but has now taken pause. The September pause is seasonal; as six of the last seven years have seen September inventory levels drop from August. Nevertheless, the current stability of inventory gives hope that any price drop may be tempered.
The real question is when will buyers regain confidence? Some may wish to quickly get a 10 percent correction out of the way so we can get back to a brisker, happier time. The feeling among a growing number of sellers, seeing few showings and no offers, is frustration. Buyers only back off further.
As always in a tougher market, it is the higher price ranges that face tougher odds, even though the upper ranges have done their part to keep the median strong. While 44 homes have sold for less than $2 million and currently about 40 are on the market, the prospects for homes priced at $2 million-plus are gloomier. Eighty-nine have sold for higher than $2 million in nine months, but 169 are on the market. The days of huge reductions from asking price to sale price have not yet arrived, but many of the most desperate sellers may soon take that hit. Market times have certainly increased, while agents adjust their expenditure budgets and plan on the long haul for many listings, knowing as always the customary batch of unmotivated and unrealistic sellers have almost no chance of selling.
On average, about four to five homes per week enter escrow. One to two of them will cancel, another sign of stingier, cautious buyers. Nevertheless, the three that will close include one to two buyers who are willing to spend several multimillion dollars.
Will 2006 be known only for a sudden slump in the market? Not necessarily. The highest sale ever has occurred this year, topping $30 million. Another sale at more than $27 million just closed escrow and will boost final quarter figures. The year has seen other sales of $10 million, $11 million, $12 million, $13 million, $14 million and $17 million.
Five years ago, the market took a similar pause with one difference – value increases halted. About 353 sales in 2000, the all-time record, slumped to about 246 in 2001. The volume dropped 25 percent, similar to this year. The calendar changed to 2002 and the market burst above 300 sales again. Perhaps 2006-2007 will have a similar sequence. Then again, might days of heavily slashed asking prices that convert to laughingly low sale prices be just around the corner? It depends on the behavior, and psychology, of buyers as they enjoy decent interest rates along with tempting hints of lower prices.
The market is closed to all but those who must sell and those who must buy, it seems. Three sales per week affect the pulse of the entire industry. For 210 homeowners looking to sell their house and 260 real estate agents looking to sell any house, there is a great deal of down time.