The Malibu Real Estate Report

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Rick Wallace

A split market blurs perception and reality

We begin by drawing a triangle. A big triangle with long lines between each point. Each of the sides is of equal length. The three points are labeled: Perception, Reality, Results.

There you have the Malibu real estate market in the late stages of 2007. Little will make sense when you study the relationships between each concept. The perception of the market is different from the reality, and statistics can’t confirm either.

The perception is that the market is horrible. In some ways, it is. The number of homes selling in Malibu is very low. This year will see the same paltry total as last year-only about 170 to 180 deals.

The reality, contrarily, is that more high-priced Malibu beach homes and estates are selling than ever before. And, at much higher prices. How about this for a headline: “MALIBU AVERAGE HOME SALE PRICE UP 20% IN 2007.” It is actually true! The price per sale has boomed throughout the year.

But is it a fair representation of the whole market? Not at all. This is a market with such drastically mixed signals, it is unfair to use any one statistical measurement such as the one above. Perceptions are incomplete. Realities are mixed.

Indeed, the average sale price is up about 20 percent from last year when about 173 known sales averaged about $4,094,000. This year, 152 known sales through October totaled $749,446,000. That averages to $4,931,000 each. The increase is 20.4 percent. What a year!

Also true is that just about every listing below $3,050,000 languishes unsold and price reductions by the truckload are a daily feature of the market. Some home sellers feel they can’t give their house away. Market periods are expanding.

Why is the $3,050,000 level notable? Because that is the median of the 152 sales so far this year.; 76 sales have been at that price or less 76 have been for more. Add this headline to the deception: “MALIBU MEDIAN PRICE TOPS $3 MILLION, UP 7 PERCENT FROM 2006.” True, again. Last year, the median was $2,850,000.

Yet, week after week, the list of sales in the MLS is a trickle; maybe two to three homes. Almost as many sell in private transactions, which often involve celebrities or otherwise tend to indicate high dollar amounts that elude initial detection by standard statistical services.

At the low end, things are awful: In August 2005, no homes in Malibu were listed for under $1 million. Now there are many. Only seven homes have sold in Malibu for less than $1.5 million. That could sound like a good thing until you realize that 44 such homes have been listed. It has been practically impossible to find buyers under $1.5 million.

As outlying markets struggle due to bulging inventories and heavier lending restrictions preventing new buyers, Malibu feels their pain at price levels closest to those situations. For $1.5 – $2.5 million listings, it is hardly less of a struggle. forty-seven such listings have sold all this year; about that many are on the market now. That equates to a 10 month inventory of homes available. Almost every single one of those listed for more than two months has seen at least one price reduction already. (In a further sign of a slowing market, only seven of those sales closed since Aug. 1).

Along with skimpy condominium sale production, Malibu homes under $2.5 million are selling at a relative trickle. It could not be much worse.

On the other side of the coin, 19 homes have sold in Malibu for more than $10 million! By that measure, it has been the best year ever for local real estate. Even in the recognized boom years of 2004 and 2005, $10 million sales were rare. Now they are frequent.

What is the essence of Malibu real estate anyway? Is it the big sales that drive the market? Or the typical $1.5 million house in the hills and the tract areas that is representative?

Essentially, the market it doing two completely opposite things within one ZIP code. Malibu has experienced this dichotomy in the past. Even when the heart of the market is slow, the upper end often pulls the plow. That is the reason Malibu has experienced practically no years that prices showed a statistical drop of more than a few percent. The median tends to be top-heavy when sales are slow.

The saving grace has been very low inventory. There has been no rush of homeowners to get their house on the market, foreclosures are almost nonexistent and selection has remained thin. The over-riding sentiment for most residents is to wait out the down time and sell in better days, if necessary. Well below 200 homes are for sale currently, and less than last year’s supply at this mark.

For homeowners who can’t wait, however, it is a buyer’s market. Only the seller that offers the best price gets the precious buyer. A new reality of lower comparable sales will likely take hold in months to come. Future sellers will have to adjust their hopes accordingly.

At the same time most price levels struggle, major money keeps pouring into town and mammoth private deals drive up values. Statistically, that is. It is a time when the numbers have little reflection on reality, and no connection whatsoever to perception.

Rick Wallace of the Coldwell Banker company has been a Realtor in Malibu for 20 years. He can be reached at his web site: www.RICKMALIBUrealestate.com.