Pricing trends now indicate acceptance that prices are going down. The current question is: how far?
The local real estate industry is feeling a double whammy. Not only are sale prices much lower, but the number of sales this year has been dramatically fewer as well. While the median price has dropped about 33 percent in 2009 in the 90265 ZIP Code, buyers have refused to jump into the market. Thus, Malibu is on pace for fewer than 100 home sales this year. Total volume projects to about $600 million less than just two years ago-a 62 percent plummet.
During several years this decade, home sales volume in Malibu hit near the billion-dollar mark, including in 2007 when about $966 million in real estate sold in just the single-family home category, not including mobile homes or condos. Through September of this year, the tally was less than $300 million and projecting to $365 million.
Those wanting an insight to future price trends can compare the inventory to the number of sales. Since 2005, exact opposite dynamics have taken hold. In 2005, as few as 98 homes were for sale at one time-while the number of sales hit 264. This year, 268 homes have been for sale at the highest point -and only 92 homes are projected to sell.
Every part of Malibu is seeing volume about 75 percent less than it was in 2007, through September. The upper end, which lagged two years behind the rest of America before it felt a strain on prices, is feeling the hurt now. While 58 beach and bluff estates sold in 2005, and a respectable 32 such sales occurred in 2008, this year has seen only 15. Sales more than $10 million numbered 25 just two years ago. So far this year: six.
At least Malibu has completed its long and deep period of denial that prices would go down at all. As a general rule, home sellers, aided often by the brokerage industry itself, have been pricing properties for ever-greater appreciation, even as buyers intensified their boycott. Pricing trends now indicate acceptance that prices are going down. The current question is: how far?
The local real estate industry not only faces ever lower revenues from fewer sales and lower prices, but also longer marketing efforts, additional outlays of time and money, and bigger battles to get deals through escrow. Home sellers feel a similar pain, in the emotional toll of long marketing efforts that now average well more than a year while seeing equity positions reduced dramatically or wiped out.
The accompanying chart of Malibu/90265 home sales for the past five years is based on a complete review of the local Multiple Listing Service and many other sources. Two sources or more are used to verify sale information in almost every case. Neighborhoods are grouped geographically to allow for sufficient data to display price and volume trends. Of course, within each area noted, specific neighborhoods have divergent price averages.
Malibu is a unique real estate market that lags way behind other markets. When virtually every region in the state was reporting 40 to 50 percent drops in value during the past two years, Malibu deceptively edged up in average and median price. Now Malibu has seen a certifiable 33 percent drop in value, still lagging most other areas that have completed their 50 to 60 percent downward adjustments and begun to inch upward.
For way too many sellers, the news that Malibu was holding its price the past two years was all that mattered. Now, the news that other areas are slowly increasing in value is all that matters to them. Never mind the two-year gap in time and 60 percent fall in values in between.
At the top of the market, Malibu values enjoyed a factor of nearly six over the state median -the California median was about $560,000 in 2007, while Malibu registered a median just more than $3 million. If Malibu presently had the same factor of six over the state median, local prices would average at about $1.5 million instead of the $2,225,000 recorded so far. The state median has stabilized at about $250,000, the tier it was in year 2001. It is questionable, besides the consideration of vital supply and demand factors, whether Malibu will maintain its current level of nine times the state median level.
Loose lending practices were to credit for the spiraling price appreciation of 2001 to 2005 and the subsequent collapse. Lending practices, virtually everyone agrees, are the prime culprit of the current stagnation, as well, in opposite form. Ultra-severe application standards are keeping vast numbers of buyers from qualifying for loans they would've easily secured before. So, while many sellers and buyers are fully motivated to bring liquidity to the marketplace, the system remains stuck in the mud.
All while interest rates are obscenely low. Or is it because interest rates are obscenely low? Super low interest rates are great for borrowers, but uninviting for investors/lenders. At least within Malibu, lenders are clearly reluctant to risk high dollar amounts for little interest rate reward while prices reflect 2005 levels and the rest of the state operates in year 2001 realities.
It is a painful time for the industry, for the homeowners stuck with dwindled or lost equity and for the buyers who would love to buy, but can't qualify. And not really much fun for the messengers who report it.
Rick Wallace has been a Realtor with Coldwell Banker for 23 years.
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