They all start out with the highest hopes and a most elevated view of their property value. Firmly convinced their special little slice of heaven will be further branded an investment success as well, the Malibu home owner lists their home with a broker and awaits their due bounty.
And they wait. And wait. And they reduce their price. And reduce their price again. A small percentage are the fortunate ones: The Malibu home owner of the past three years who actually finds a buyer who closes escrow and allows them to move on to a new lifestyle. There are also the unlucky ones, who lose their house to foreclosure along the way.
But this is a story of success, a story of those who prevailed, and overcame the obstacles and sold their house in Malibu so far in 2011. All 38 of them. They faced the same odds that more than 300 current Malibu home sellers face. Odds that another 100 have already faced this year before giving up, pulling their houses off the market.
The accompanying chart is a list of all the homes in the 90265 Malibu ZIP code that have closed escrow this year through May. The tally is 48 homes, including 10 REO sales and short sales, projecting to a mere 120 home sales in Malibu this year. That leaves the possibility that as many as 500 homes will be listed for sale in Malibu during 2011, but not sell.
As such, in times when 80 percent of the listings in Malibu result in no deal, it is not surprising many listings experience drastic price reductions before finding a buyer, or spending very long periods on the market. Or both.
As noted, only 38 sales were standard, with the homeowner taking equity proceeds from the sale. More than half of the sales on the list had first hit the market at least a year earlier.
Examples:
– A beach house on Sea Level Road went on the market in 2005 at an asking price of $8.4 million. It was reported in escrow at $7.4 million in 2008, which cancelled. March sale price: just less than $4 million.
– Two houses in Latigo Canyon were on the market about four years ago in the $2 million ballpark. They have both been foreclosed since. Sold as REOs, they both went for around $800,000 this year.
– A house in La Costa Hills was on the market for only 15 months, but had five price reductions going from more than $3 million to less than $2 million.
– A home along the Mulholland corridor sold for less than half its original asking price in May, but needed short sale approval.
There also have been some positive results:
– A Point Dume property landed on the market at a little less than $4 million, getting multiple offers and transferring at full price (evidence that buyers are ready to buy if the price is right).
– A home in Malibu Park sold its first day on the market, although the owner was willing to be flexible, ultimately taking only 75 percent of the list price.
– Another La Costa Hills home had a more “normal” process. Listed at $2,850,000 last June, it sold for $2,550,000 by March.
For every one of the 300 home owners on the market today, there may be 1,300 more who would like to sell this year if not for these harsh realities. It’s the fault of no entity in particular. The system has simply collapsed. The main artery of the real estate industry, borrowed money, is clogged with failure, regulation and over-cautiousness.
This may be what market values would have been all along in a virtual world of cash-only purchases. It is not the market that is so bad-underlying demand dynamics have changed little, as Malibu remains an appealing place to live-it is the system that has fundamentally devalued real estate as an asset. It will eventually normalize, allowing market values to rebound and correct, possibly to a strong degree. Many buyers will wish they jumped in while the system was weak. This circumstance, which is a once-in-a-lifetime nightmare for some, is an incomparable opportunity for many others. While the trends have favored buyers for so long, those trends may reverse before long.
When will the system recover, is the question. Until that time, a virtual financial tsunami is sweeping away homeowners who could not see it coming. Most of the sales on display here reflect people who found dry land with whatever dwindling equity they could muster. Sadly, in the literal financial vernacular of the day, more homeowners are going underwater.
Rick Wallace has been a Realtor in Malibu for 23 years.