Wednesday, November 19, 2008 1:49 PM PST
Sales total a record low
A longtime Malibu Realtor once said, "In this business, you can't have a memory."
The essence of the comment was that only the present real estate market matters. What happened in the past is meaningless. Pricing a property now is best done without any regard to the past.
The admonition applies to both buyers and sellers, to prices moving up or down. For a buyer wishing to obtain a flat acre on Point Dume with a stylish house, for example, the $35,000 price tags of the 1960s have absolutely no bearing on the present.
Similarly, and closer to home, homeowners wishing to sell
now might as well forget about the past five years. It was a different time. It
has no relevance to current conditions.
While each home should be priced based only upon the circumstances of the present and ignore past results, the market as a whole gains perspective when compared to the past.
Only 86 homes had sold through October in Malibu and the year will surely score as the worst in 20 years. The chart below highlights the pace of home sales since 1989; the one to the right shows the monthly flow during 2008 in particular.
If Malibu makes it to 100 sales, it will nevertheless still be the worst year of the past 20, including any year during the early '90s downturn.
Two trends are notable from the second chart. First, the number of sales has been slowing. Even the summer was no help. The first five months saw 47 homes close escrow; in relative terms, poor enough. The last five months have been worse, less than eight homes per month average. That is out of roughly 200 to 220 actively listed most of the year. Only single-family homes in the 90265 ZIP Code are considered in these comparisons.
Second, the lower-priced properties are getting more attention. This mirrors a phenomenon in the state as well as region. Malibu had been boasting a resilience and exclusivity from the region's housing problems. High-prices sales and artificially inflated median values were the cornerstone of the local market until the past few months. Whereas $10 million sales were plentiful during 2007 and during the early stage of this year, only one has sold in the past four months, and none on the beach. During the January-June period, 22 homes sold for more than $5 million in Malibu; only six since.
State sales are increasing robustly, meanwhile. Besides an emphasis on foreclosure activity, the increase in state sales activity this year is explained by the fact that 92 percent of sales are below the maximum conforming loan limit (albeit at a higher limit than last year). In 2007, only 50 percent of sales were within the limit. Whatever encouraging signs may exist in this or any market, they are particular to the very lowest price levels.
Of the closed Malibu sales since July, the median market time has been 14 months. That is, of the houses that were able to sell, half did not close escrow until at least 14 months after first appearing on the market. The number is increasing; one year ago the median was eight months.
Many homeowners have decided to abandon the sale effort and rent their properties instead (or offer for either rent or sale). There has been little refuge in the rental market, however. More vacancies and lower asking prices are the primary features of the rental market, with supply/demand dynamics as follows: More properties are on the market, their owners frustrated from not selling, while consumers keep a tight hold on their money, making fewer expenditures on homes, cars and goods-or rentals. Fewer folks seem to be moving, period.
The median price reported in the Multiple Listing Service in 2007 out of 348 lease transactions, including summer beach rentals, was $6,700 per month. The 315 transactions reported this year have had a median of $6,500 per month, but again much of the activity was earlier in the year and the pipeline has slowed in recent months. Only 79 rentals have occurred since July (the median of those down to $5,500 per month).
With so few sales, it is difficult to get a handle on where Malibu prices are-or where they will end up. But some handwriting is on the wall. It is on four walls, actually:
The Dow Jones stock market high in October 2007 was 14,164. It is now down about 41 percent.
The median California housing price sales reduced in the period of September 2007 to September 2008 from $535,760 to $316,480, a drop of 41 percent.
Southern California regional housing prices plummeted to $308,500 during September. That is a 39 percent decrease from their high 14 months earlier.
Many real estate investment vehicles are reporting 30 percent to 40 percent losses from their peak. As an example, the CalPERS investment fund, the country's largest pension fund serving retirees of state and local governments, recently reported declines of 35 percent in their real estate portfolio, with holdings in both equity and debt positions.
Rick Wallace has been a Realtor in Malibu since 1987. Rick can be reached at www.RickMalibuRealtEstate.com