Rick Wallace / Special to the Malibu Times
In a slow year so far, supply of all homes for sale tops 300.
With enormous pressure on prices to go lower, it is the low end of the price ladder where Malibu real estate activity is busiest. For single-family homes, less than $1.5 million is where an increasing share of sales is taking place.
So far in 2011, 15 home sales have been in that lowest price tier for Malibu. That’s not a big number. But the total tally of sales, through last week, is a scant 45 homes. Malibu sales have been slow to start the year, way behind last year’s pace and more akin to 2008 and 2009 when the shock waves of the mortgage and real estate crisis first hit our market.
As such, a bigger slice of the sales pie is going to the low end. That makes sense considering that many buyers: do not have much or any equity to take from their previous property to invest upward into Malibu; have increasingly felt their net worth dry up from a stagnant economy; face unwavering requirements to get loan approvals, requiring higher down payments than in the past.
In 2006, barely 10 percent of local home sales were less than $1.5 million. Now it is 33 percent and increasing. Currently the Multiple Listing Service reports 34 Malibu homes in escrow-half of them are listed at $1.7 million or less.
Six homes have sold for less than the $1 million benchmark; five more are in escrow.
This inevitably has an impact on the median price. So far this year, Malibu has hovered at $2 million for a median price of the 45 sales, after dropping to $2,250,000 last year. We are 10 percent off, so far. Long gone is 2008 when the median topped out at $3,225,000. Next stop is 2003, the last year the local median was less than $2 million.
By another key measure, it is back to 1997: the inventory. The local industry just surpassed 300 homes listed for sale in the 90265 ZIP code. It was in September 1997, after a brutal five-year run of lowering prices and high inventory, the recovering Malibu market dropped to only 303 houses for sale. The number kept dropping, squeaking below 100 in March 2005.
Three hundred three homes for sale currently, on the rise, and not even the summer burst of listings yet in place, make for intense pressure on prices to drop. A rising inventory would not be so bad if it was commensurate with rising sales. But just the opposite is happening. The sales pace this year, projecting to only about 120 transactions, means more price reductions are a virtual certainty. The supply keeps heating while the demand is staying cold.
The negative cycle continues to feed on itself. As more struggling homeowners cannot hold on to their home, and have little hope for an improved value, more properties get foreclosed or sold at the rock-bottom prices.
All five homes less than $1 million in escrow now are bank-involved listings, either a foreclosure or short sale (three of the six that sold were such).
In the condo market, a similar phenomenon is taking place. The low end, involving units worth less than half a million dollars, is getting the most attention. Twenty-six units have sold to date, with exactly half fetching $500,000 or less. Probably 80 percent of Malibu’s condos would presently appraise at more than $500,000. But those are not what are selling.
For the price tiers more than $1.5 million in Malibu, daunting odds face sellers. For example, between $2 million and $4 million there are currently 69 homes for sale off the beach. Meanwhile, only nine have sold all year. That equates to two per month, and a 34-month supply in that price range. Some of those sellers, whether obstinate or optimistic, risk lower values during their 34-month wait.
Seventy-eight beach listings are active (the most since May 1999). Meanwhile, only six have sold. Six beach sales during five months with 78 available? That translates into a six-year inventory under current conditions.
Two of the beach sales in Malibu were for more than $10 million. Last year, there were 17 such sales, giving the overall volume a pulse that was otherwise feint. A recent sale on Encinal Bluffs for less than $8 million involved a property that last sold in 2007 for more than $18 million. A Point Dume bluff deal at about $9 million was first on the market for about $20 million more than three years ago. The high-end can sell, but it takes some flexibility in many cases. At least both big sales were in late May, giving some hope to the summer season.
Buyers know Malibu has among the very best real estate in the world. Many want to buy. But there is only so many high buyers can reach, financially. Many willing buyers are not able buyers under the current economic structure.
Sellers are made up of two different types. There are those that love their home, are unwilling to believe that 35 percent to 45 percent of their value has been lost in this debacle, and price it accordingly. And there are those that love their home but financially have to swallow reality, with no more time to question it. Buyers know this. The Malibu buyer in 2011 is looking for the fruit hanging lowest on the tree.
Rick Wallace has been a Realtor in Malibu for 23 years.