Bad news difficult to find in Malibu
By Rick Wallace / Special to The Malibu Times
Eleven home sales topped $10 million during 2006
“The year the market fell apart.” “After years of huge price increases, prices finally plummet.” “Bloated inventories of anxious Malibu sellers.”
This year was supposed to be all the above headlines. It’s ending as none of them. Though Malibu real estate took a breather after four straight years of plentiful sales and huge price increases, this year will soon find a most unexpected conclusion-prices are still going up.
The inventory never bloated. Interest rates still provide incentive to buy. And 2006 is ending, on top of it all, with perhaps the strongest activity of the entire year.
Searching for bad news? There is only this-the number of sales is way down as the year closes out. This was a pace recognized and consistent all year. One hundred sixty homes had sold and closed escrow by mid-December and the final year tallies will fall short of 200. The volume of homes sold in the 90265 zip code will fall about $250 million short of last year, closing near the $700 million benchmark. Indeed, asking prices have been speedily heading south.
Sales prices have held, nevertheless, and, in fact, have increased. The perception of rapidly decreasing asking prices with the reality of gradually increasing sales prices has been quixotic. Buyers in little quantity but high quality have snatched up homes with dropping list prices before they reached last year’s value.
What, exactly, have prices done in 2006? The median (the price where half the homes sell for less and half sell for more) of 252 sales in 2005 was $2,500,000. The median of 160 sales in 2006 has been $2,787,000. Throughout the year, while the less than $2 million market struggled, the more than $4 million market has been robust.
Last year, the average of all sales was $3,772,000. This year it is $4,037,000.
Eleven homes have sold in Malibu for more than $10 million this year. Fifty-three homes fetched more than $4 million. The head of the market is growling even if the rest of the body is calm. Every indication is that local real estate consumer confidence is high.
While homes prices have yet to plummet, the recent local inventory has. Malibu had 207 homes on the market the end of October. It is 160 at this writing. While the change is partly seasonal, rarely does it drop that much. The unrealistic or unmotivated sellers have begun to shrink from the marketplace, causing less hope for buyers to see value reductions soon. The result has been a pickup in sales as the year winds down, brokers reporting busier activity now than in summer.
During the past 41 years in Malibu real estate, the median has increased 20 percent or more, in 12 different years. It has gone down only eight times. As tempting as it was to wait for lower prices in 2006-or 2007-it is always risky. Bad news is tough to find.
The median is nearly $2.8 million. Is it realistic to believe it could ever get back to, say, $2 million? Is there anything foreseeable that could bring a huge crash to Malibu real estate?
The ocean and mountains disappear or become undesirable? This would be bucking a trend of several million years and, secondly, there is no hint humans will stop desiring large bodies of water and hillsides for their abodes.
The population of Los Angeles begins to rapidly drop? With a huge reverse of migration out of the Southern California area, demand for the upper echelons of home living could disappear, and values would drop. Our market has been blessed with far more citizens wanting to move here than move away. Such a reverse is not foreseeable. Caps on home construction and growing population and demand keep all real estate rising in value.
A mega-disaster wipes out much of our town? A tsunami could do it but our next really strong tsunami could be 400 years off. Fires hit often but preparation against widespread loss is better than ever. Wave action has taken its shots and rarely produces extensive damage beyond a handful of homes. If anything, the Malibu spirit has made for a more valuable town when facing or surviving disasters.
Interest rate spikes render all properties less valuable? Could happen, but the horizon offers no hint of such. High interest rates would be a national crisis aside of Malibu real estate, though it would not necessarily change the overall magnet of buyers who still wish to live here rather than other places. Ultimately, this may be the most likely scenario for disaster.
Massive industry or development changes the face of Malibu? Nope. Not even on the distant horizon.
Traffic becomes unbearable on Pacific Coast Highway? Pepperdine, HRL, Malibu and adjacent cities are all practically fully built-out. There are no foreseeable sources for dramatic increases in highway traffic.
New tax laws render elite real estate less valuable? Hard to picture a political atmosphere that might bring that about to any significance.
It’s a stretch to imagine any circumstance where the underlying appeal of our real estate might be duly crushed. Maybe if the little park at the Country Mart was closed down.
More seriously, certain local ultra-wealthy men with access to the finest forecasters and data seem to concur, evidenced by investments of more than $100 million into Malibu real estate by one billionaire after another, Malibu real estate has a first-rate future.
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