One million and 100 have become key benchmarks on the Malibu real estate landscape. One million refers to dollars, such as $1 million homes, a fading commodity unless you are referring to mobile homes or condos. Only two houses in Malibu at this writing, in Corral Canyon, are listed for sale for under $1 million.
The other critical benchmark, 100, reflects the number of homes for sale. Incredibly, the inventory has been teetering this winter at just more than 100 homes listed. That means that out of approximately 4,000 single-family homes that exist in the Malibu/90265 area, less than 3 percent are for sale.
All conversations regarding the epic increase in local home values can begin with this statistic. The latest count of homes listed is at 101, though it changes daily. That is the very lowest known inventory on record. As a guess, you might have to go back to the 1960s or earlier to find a time when so few Malibu homes were listed for sale.
With so little to choose from, it would take a catastrophic disappearance of buyers for values to go down. That, obviously, is not the case and won’t be for some time. Low interest rates and ridiculously low inventory virtually assure increasing prices for the foreseeable future, at least in the ranges below $3 million.
The accompanying chart describes the remarkable free fall of inventory. In the depths of a down market of the mid-1990s, the inventory exceeded 380 homes. Even at mid-200 levels in the year 2000, values were ascending rapidly. Last year, from February to April, when the inventory was in the 100-110 range, prices raged upward (as they did throughout the state when, in an amazing three-month period, all of California’s values increased 10 percent). This winter-spring season seems to bode a similar result.
It may be that an underlying trend in Malibu had taken grip and will affect the local marketplace for some time: People are extremely reluctant to give up their most precious, net worth-producing commodity. Malibu real estate, in an environment of a somewhat capped supply, is becoming like art. Even as citizens move and alter their lives in normal ways, they often do so without releasing ownership of their homes. The low inventory, creating a storm of increasing values, is feeding on itself and remaining at minimal levels.
The market, even with news of lower affordability indexes, is still frenzied with a desire to own more than a house and a view and yard; it is frenzied with the desire to own a promising investment. Until notable changes occur in the economy or with interest rates, or we are hit with a colossal unexpected disaster, the reluctance to sell dominates local thinking.
Condos, raw land and mobile homes all ride the wave, also. Slim inventory exists throughout the Malibu real estate spectrum. Perhaps, when the trend reverses one day, the pendulum will swing very strong to the other side and glut the market. Perhaps current appreciation is artificial and speculative. Buyers are reluctant, however, to bet on it. The $1 million house of three years ago, affordable at the time, now is $1.5 million and gone. The competition to get a foot in the door of Malibu real estate is intense.
As a result, brutal challenges await prospective buyers. Only 25 homes on the beach are for sale. In June 1996, the number was 116. Getting on the water, whether via home or condo, becomes a more daunting challenge by the month. Less than 1 percent of the homes in all of Malibu are listed for $2.5 million or less, only 35 at this time. Every day, dozens of prospects contact local Realtors by phone and e-mail to begin seeking the Malibu home of their dreams. A miniscule fraction will be able to afford the home they want.
Within the industry, new agents join the business locally every week, now numbering upwards to 250. With nearly a billion dollars in total realty sales last year, there is plenty of work and business to go around. Still, 250 Malibu agents chasing 105 houses for sale? The great majority of listings are with the top-producing agents. Approximately 200 agents, or 80 percent, are working locally without a single home listing.
The number of homes sold and the total volume, as predicted by the California Association of Realtors for the state, is likely to dip in Malibu also. There are just not enough homes to trade to boost overall volume. That is, unless prices rise greatly enough to make up for it.
How will the trend reverse? The most important indicator is the relative growth of population in the Southern California area related to housing construction. Ultimately, the demand of immigrants and business growth in our region determines the demand on the upper levels of housing such as Malibu. As it is, crushing population growth in the outlying areas is not being met by increased housing. From Palmdale to Temecula, the construction of living space cannot keep up. Upward mobility to every rung on the ladder is bringing new wealth and spending power to lift homeowners to more valuable housing. At the top, coveted cities like Malibu, Beverly Hills and San Marino flourish. When the upward thrust dissipates throughout the region, and/or outside competing areas such as Las Vegas or the San Joaquin Valley draw more of our citizens away, inventory levels may finally increase substantially.
Currently, there is no realistic scenario in the foreseeable future that will make the supply or demand factors much different than they are. As a result, an increasing percentage of listings are probate sales. Sometimes, it takes a death to wrangle a house onto the market! The way it is headed, the day may come that 250 local Realtors are watching the obituary columns to find business.
Rick Wallace of the Coldwell Banker company has been a Malibu Realtor for 17 years. He can be reached at his website, www.RICKMALIBUrealestate.com.