A good real estate market has image problems.


The Malibu real estate report

By Rick Wallace / Special to the Malibu Times

When is a good Malibu real estate market not a good market? Perhaps a good time to ask the question is these days. The answer seems to be “these days.” Is there ever a time when things so good feel so bad? We may be in such times.

In any other period, home sellers and real estate agents alike would love the period we are in now. More buyers than inventory, fast market times, low interest rates and practically every other measure would indicate these are very good times, and prices are not going down. Perception is half of everything, nevertheless. As all the above factors begin to weaken, a whole new atmosphere clouds the local real estate market.

Partly seasonal and partly inevitable, the number of showings, offers and sales is slowing across the board. A period of adjustment is the flavor of the day. The buying public has become exhausted to the point of becoming difficult.

Whether this is a reliable warning of lower prices to come will be better known in the early part of 2006. Typically, in recent years, by February activity picks up after slowing in the final quarter of the previous year. Who is to say plentiful money and demand won’t be back in style in a few short months.

What are the real trends and facts?

Interest rates have crept up slightly for most loans, but remain among the lowest in 40 years, with no dramatic increase expected. Market times are creeping longer but remain at very short periods compared to the last decade. Sale prices are still very close to asking prices on the whole, but with fewer multiple offers and greater numbers of skeptical buyers. Inventory? The number of homes on the market is still a scant 141, measuring single family homes in the 90265 ZIP code. It has been inching upward slowly since May. It is the highest all year, but a crisis? Far from it. In 2004, the inventory was at the same level as now for most of the year. The last year that prices were flat or lower, 2001, the inventory was never less than 210. There is no rush of new homes on the marketplace and buyers still face little selection.

Nevertheless, beach listings have gone from 26 in May to 38 now. Listings under $2 million have gone from 17 in September to 32 now.

Accordingly, prices appear far from a point of lowering. An environment of more sellers than buyers is likely many months away. Nevertheless, we may be heading in that direction and that is what matters most. Good markets after bad markets are fun, but this version, coming after an unbelievably great market, is less jovial.

No question buyers have dug in their heels to some extent. More showings are fruitless, negotiations are tougher and escrows more difficult to close with the newly buoyed buyer of the day. Sales have slowed, admittedly, but the quality of sales has not.

How bad can the local market be when we have just seen closed deals that have approximated $13 million, $17 million and $22 million, all on Broad Beach? Or $6 million, $7 million and $13 million on Malibu Road in the last couple months?

Malibu Cove Colony has pumped out at least three sales in the $7 million range recently. La Costa Beach has had many sales above $6 million also. Bad market? Through last year, $5 million was just about the top on La Costa.

The beach is not the only place for record values. West Saddle Peak has burst above the $2 million threshold, La Costa Hills is seeing $3 million plus, Carbon Mesa just had a deal at nearly $6 million; Serra Retreat at about $20 million. In La Chusa Highlands there was a recent sale well above $2 million. These were all neighborhood records.

The”poor” neighborhoods of Corral Canyon, Latigo Canyon and Malibu West regularly see sales at $1.5 million or more. In Malibu Park, a house in major fixer condition sold for $2.4 million. Just more than an acre, just a peek of ocean view, the same house sold a year ago for about $1.8 million. The median value on Point Dume has skyrocketed to about $3.5 million for home sales.

But one could argue that many of the sales were based on summer optimism. It is in the last two months that cool air has arrived, figuratively. Through August, approximately 180 homes had closed escrow in Malibu, about .741 homes per day. In the two and a half months since, about 45 homes have shown sold, or .592 per day. Twenty-seven more homes are in escrow, at this writing. Those escrows represent recent purchasing decisions, however, indicative of a healthy marketplace, and not necessarily different from past years.

Price reductions have become a necessity for once-cheery sellers, and the grounds for discount commissions and limited service are less fertile. Contrarily, the sides of the playing field are lined with Malibu homeowners hoping to make moves upward within, let alone the hordes of outsiders who wish to move to this town. Outside areas are reporting dimmer sales activity than Malibu.

It’s anybody’s guess how the market fares in 2006 when the underlying fundamentals remain good but the popular media opinion remains pessimistic. A price leveling seems inevitable, and a price drop will happen someday. How far below current values, or how far below what values yet achieved is the great question. Along with this one:”When is an average market a bad market?”

Rick Wallace of the Coldwell Banker company has been a Realtor in Malibu for 18 years. His past articles can be found via his web site at www.RICKMALIBUrealestate.com.