The Los Angeles Dodgers made it to the World Series in October for the first time in 29 years. Practically everyone in Southern California wanted to attend the games. But the stadium only held seats for about 55,000 fans. How was it decided who got to go the games, and who did not? The answer: about $800. The open market for tickets to the games produced a floor level of about $800 to get the worst seats in the park for most of the games. Those willing to pay that amount got in. Those not willing? They watched on TV.
Had the Yankees been the opponent instead of Houston, there may have been more intense demand. Perhaps only those willing to spend $1,000 might have gotten entry. Maybe next year, with four recent home games played, if the Dodgers make it again, demand will be less intense. Perhaps then the cutoff point will be lower?
The very same principles of that one-time 2017 event apply to Malibu real estate. Every day and week, there are millions of people who would love to own a home in Malibu. But there are only so many homes (and condos, and mobile homes) that can be occupied. Who gets in?
The current answer is about $1 million to get any house at all in the 90265 ZIP code. Perhaps $600,000 will get you a two-bedroom condo. The median of the home sales is about $3.5 million. If there were far less demand of ready, willing and especially able buyers, it would take less money to buy among the houses available.
The price of a home, or better defined as the “value,” is simply the latest score on who gets in or who does not. It is merely the end result of a massive bidding process that is taking place at all times, to determine who among the many gets to own a Malibu home.
The price is the end result, although it is much more common to think that the process begins with a price. “Price” takes on a different meaning for a property not yet sold. In that case, which is more familiar, price is simply a marketing tool. It is like a waving sign that asks, “At this price, are you willing to be the one person who owns this property, or will you join the millions not ready, willing and/or able to buy this?” Most of the time in Malibu, the answer is the latter: Nobody wants to own the property at the price advertised. But perhaps one party is willing to own it a price near that which is listed and advertised, and then a sale may culminate.
Then, it is more accurate to describe the “value” of the property—or fair market value, or open market value. That is when everyone is exposed to a home for sale, but the public collectively decides what price one person is willing to pay and, accordingly, the price nobody else is willing to pay at that point in time.
Real estate agents essentially predict the value that a property will end up once all the dynamics of supply and demand will play out.
There is no magic or sinister secret associated with values of real estate in Malibu. Values are just a marking of what the public is ready and willing to pay, and especially who is able. Many factors affect the final tally of supply of demand. Supply is just the number of homeowners, for their personal and/or economic reasons, willing to offer their property for sale at any point.
Interest rates are the most popular culprit for determining demand. If rates are low, mortgage payments of the purchasers are lower and the total capability of the buying public is greater. That drives more competitors into the market and pushes up prices. As interest rates rise, the opposite effect takes hold.
In 2000, the median price of home in Malibu was about $1,250,000 (the median is the price where half the homes sell for less and half sell for more). The economy, interest rates and other factors caused a circumstance where $1,250,000 was the point that enough ready, willing and able buyers could purchase the homes being offered.
Virtually no houses have been added to the inventory since then. Building restrictions are so tight and onerous and expensive, the supply of available homes that exist has hardly changed. But the number of people wanting to live in Malibu has continued to increase exponentially (as it has since the 1960s). And the capability of these wealthier parties has increased. This year, about $3.5 million will be the final benchmark determining who got in—and who did not—to the average house.
For those who still want to live in Malibu (or move elsewhere within Malibu), next year more tickets will be available. If not for the Dodgers in the postseason, some Malibu homes will certainly hit the market, competing buyers will measure their capabilities and make their decisions, and all the factors of the economy and marketplace will be considered. Maybe $3.8 million will be the dividing point, maybe $3.2 million. And, just like those fans who went to the games rather than sell their valuable tickets, all but approximately 250 homeowners will make their decision to keep holding.
Rick Wallace has been a Realtor in Malibu for 30 years and a real estate columnist for 24 years.
