Nearly 500 homeowners in Malibu have attempted to sell their home so far this year. The frustration and, in some cases, catastrophic results of their efforts, would have been unpredictable just three years ago. While the underlying product of Malibu real estate remains the most exclusive and coveted of any in Southern California, it has not been immune to a financing system collapse and market deflation everywhere. Through August, only about 50 of the homeowners will have successfully closed escrow on their homes, a paltry 10 percent of those who have tried.
What is it like in this marketplace for those who put their personal pride and greatest investment on public display? How does selling a home in 2009 compare to past periods?
While not all 470 homes have been listed this entire calendar year-and as many as 25 more are in escrow at this time-the number represents a cumulative effort that, furthermore, marks frustrations from previous years. The tallies are among single-family homes only, excluding mobile homes and condos in the 90265 ZIP code, among approximately 4,200 homes that actually exist. The challenges current sellers face are best demonstrated by analyzing what actually sold this year.
The 50 approximate sales projects to a year total about 75, which would be fewer than last year (110) and about half of the worst recession years of the 1990s, when about 150 annual sales was the low for Malibu. Successful 2009 home sellers endured so far by making the greatest compromises versus their competition. Those compromises took shape in three forms.
First, price reductions were prevalent in almost every case. Only about 10 of the 50 home sellers this year managed to sell their home using their initial asking price which, in retrospect, was market savvy to begin with. About half the sales took place via three or more price reductions. Many home sellers determine their initial asking price with their heart rather than as a function of competitive juices and motivation. This market has usually extinguished initial wishes and forced homeowners to eventually feel the necessity of competing with price reductions.
Second, the time on market has surprised most home sellers. The median amount of time needed to sell a house, from first effort to close of escrow, has been 16 months among recent sales. That includes periods off the market and escrow time as well. That means half the homes sold were first on the market at least 16 months before; half sold within that time to establish the median. Taking into consideration only the most recent listing agent and the most recent continuous listing effort, the time has been 280 days as an average. By comparison, at the height of the market, the periods were 6 months and 140 days, respectively. Thus, market time has doubled. Again, that is among the listings that actually sold. Many homeowners have run out of time and lost their home to foreclosure or been forced to seek a short sale.
Third, and perhaps most dramatic, is the discrepancy between the original asking price and the final sale price. (Similarly, the gap between last price and sold price has grown dramatically). Buyers these days are tough cookies-they negotiate only with the most anxious seller. Sellers who have shown the greatest flexibility in their price have found buyers. How much flexibility? The average discount from first asking price to final sale price is about 30 percent. Some homes have seen 50 percent drops, such as a home originally listed at nearly $10 million that sold this year for $4,500,000. The average cut in price in actual negotiations, from last asking price, is about 15 percent. Some homes finally hit a magic price and sell close to that price, even with multiple offers. Others, looking for “any offer,” will settle for more than 20 percent off the last advertised price. These numbers are again double in apples-apples comparisons from the hot market of 2003-2005.
Suffice it to say, the Malibu market, with about 260 current listings (excluding the 210 that gave up, went into escrow or have sold) and a pace of only 75 annual sales, is clearly a “buyers market.” What does that mean?
In any price range, when genuinely ready, willing and able buyers step up, they essentially let the serious sellers in that price range bid for their business. He who lowers his price most, wins. That house sold, when the next scarce buyer steps up, the next most motivated seller will secure a deal. Each time, the comparable price drifts downward as sellers effectively jockey among themselves to score the next sale, based on their motivation, as well as their accurate gauge of the competition.
The opposite occurs in a seller's market, as was the case for several years and sure to return. More easily described, multitudes of buyers bid upon a limited number of homes available. The highest bidder wins at each sale, usually bumping up the market.
The sense of price free fall has taken a noticeable turn lately. Encouraging for prices down the road, the intensity of buyer resistance has cooled; 25 homes in escrow represent a recent bump up in activity, particularly as more sellers move aggressively to minimize the pain. Additionally, there is a possible reversing of the inventory trends that were moving upward unabated. The past two months, seasonally adjusted, have spelled a pause in the growth of listed homes. While prices will continue to reflect the realities of the times, at least the long period of negative trending, of ever fewer buyers and ever more sellers, has begun to level out.
Rick Wallace has been a Malibu Realtor with Coldwell Banker for 22 years.
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