A Real Estate Market That Makes No Sense

Rick Wallace

Every single year from 2012-18, about 250 homes sold in Malibu. For seven years in a row, the consistency was remarkable. Malibu real estate was experiencing such stability, it was impossible to predict whether a plummet or explosion in sales would occur next. Now we know. It was the former.

Even if the rest of the year is profoundly busy, sales units will be well below the standard set over those many years. Through June, only 62 sales of homes transpired in Malibu. We remain on a pace of 50 percent of normal.

Most obviously, the fire in November took 17 percent of the existing homes in the 90265 zip code. Going in, it was reasonable to expect 17 percent fewer sales and 17 percent fewer listings. Thus, 200 sales this year might be a proper target—but it will not be anywhere near that. 

The economy is bursting, interest rates are very low, if not going lower, and the rest of the state and county are experiencing stable rates of sales. But in Malibu, it is stagnant. It makes no sense.

One would guess that prices would be heading downhill fast in this environment, since there is such a lack of buying. But that is not happening, either. The effect of low demand is offset with low supply. The inventory is also measly (below the 17 percent expected decrease), as about 180 homes were for sale in mid-June in the 90265 zip code, compared to about 230 each of the past three years. 

Through the first half of 2019, very few sales and very few listings have been the story. The 62 sales have had a median price of $3.6 million, better than last year ($3.25 million) and about the same as 2017 ($3.6 million). Prices have not much changed.

Looking at real estate trends in Malibu for the past 25 years, there is no apparent explanation for this. The market as a whole was slowing beginning last summer, but nevertheless, nearby areas are selling better than Malibu. The MLS reveals that 217 homes sold in Santa Monica and Pacific Palisades the first six months of 2018. This year, it has been 162. Agoura and Calabasas went from 306 to 251 sales.

Again, it doesn’t make sense. What changed?

Well, actually, something did change. The fires of November did not just take homes out of the sales column and listings column. It apparently had a greater effect than normal.

As I have reported in the past, natural disasters (including flooding and landslides) have never had a long-term effect on Malibu real estate. For example, after the 1993 fire hit East Malibu late in the year, sales went from about 150 during 1993 to over 200 the next year. Prices were about the same from 1993 to 1994, but there was little short or long-term effect on the market from the fire that took out about 400 homes.

This time seems to be different. After past disasters, locals went on the TV news and said, “I am absolutely rebuilding. I love Malibu. Nothing will keep me away.” 

After this fire, it was more like, “The fire department disappeared. We had no defense. Where were the super scoopers? The fireman stayed on their trucks at Zuma and refused to help. Then we couldn’t get back home for 10 days.” Additionally, we have seen extensive smoke damage render hundreds more homes and condos uninhabitable. Malibu seems to still be in shock. 

The beach lost no homes, its inventory and sales capability remain, but sales are slow there, also. Only 17 homes sold on the sand through June, compared to 59 overall last year. The high end overall has gone into recession. Only five sales over $10 million so far this year; 2018 saw 27 such transactions. So far in 2019, just one deal over $20 million compared to seven last year.

Malibu has become a haunted house. The effect of the fire remains. The pendulum has swung far to one side (though a powerful spring back may result in the longer run). The cloud of the Woolsey Fire hangs over Malibu real estate.

Meanwhile, the condos in Malibu need to worry slightly less about wildfire devastation. Condos are farther from the hills and more insulated from fire (with admitted exceptions at Malibu Gardens and Tapia this past November). Fire defense and future fire threats don’t have as much impact on condo sales and values. And wouldn’t you know it—the Malibu condo market has stayed pretty normal. While the housing market that relies so greatly on fire protection has plummeted in activity, the condo market that depends less has maintained.

Thirty-five condos sold through June, compared to 77 during all of 2018. The average sale price and the median are down slightly, but the overall activity is far better for condos than homes. 

Malibu real estate will spring back from this unusual downturn. The natural course of activity will balance out in the end, particularly during a good economy. But while there is no question that a dreary 2019 real estate market is still within the charred grip of a fire unlike any other last fall, one question remains: How long will this last?

Rick Wallace has been a Realtor in Malibu for 31 years and a real estate columnist for 25 years.